It’s clear the financial climate has affected the construction industry immensely, the decline in people buying houses has meant a halt on many house building projects. But according to the latest report from the Centre for Economic and Business Research (CEBR) it’s not all doom and gloom as a sharp fall in house building, with 20 per cent fewer completions forecast for 2008 and 10 per cent fewer in 2009, is likely to be one of the key factors in prices recovering by the end of next year.

The CEBR says average house prices should rise by 30 per cent between late 2009 and 2012, 'partly driven by the shortfall in housing supply that the reduction in completions will inevitably precipitate'. This means as construction projects resume to meet housing shortages, the demand for land will increase, and therefore prices will escalate.

Richard Snook, an economist at the CEBR and one of the report's authors reinforces this point, 'The credit crunch caused a shock in the housing market and we are now seeing the second-round effects of falling confidence and a slowing economy. When prices have fallen in the past we have seen house building slow down quite quickly but take a lot longer to come back, which leads to demand outstripping supply.'

Ben Read, the CEBR's senior economist also sees beyond the current financial situation in the UK, 'Whilst the short-term prospects for the housing market look bleak ... the sharp drop in building completions will mean higher prices when the credit markets sort themselves out. The government will be concerned that with every year that passes it gets further away from its house building targets, and with developers unlikely to respond quickly when the market bottoms out, prices may recover more quickly than people imagine.'

For more information about land investment go to uklandadvisor.co.uk. We provide impartial information and opinion on investing in UK land. UK Land Advisor seeks to collect information and present it to its readers to enable them to make their own decisions. We are not making any recommendations about whether UK land investment is the right opportunity for you, that is for you to decide.