House prices will rise by less than 5 per cent a year over the next decade as interest rate rises increase mortgage bills and a recovery in housebuilding eases a property squeeze.

The Centre for Economics and Business Research, which has for three years forecast firm market conditions despite warnings from other researchers of a crash, said that properties were "no longer cheap".

The assertion was based on a comparison of mortgage repayments with wages. Lower interest rates took the proportion of disposable income spent by homeowners on loan repayments below 40 per cent in the early 2000s.

The CEBR said: "The combination of recent rises in house prices and likely rises in interest rates is forecast to take this ratio to 52.0 per cent in 2006.

"When the ratio has gone significantly above 50 per cent in the past it has always fallen back."

If annual price growth was to continue at the rates of more than 17 per cent reported by Halifax and Nationwide "a house price collapse would be unavoidable", the centre said.

Douglas McWilliams, one of the report's authors, said, however, that a "soft landing is more likely than not".

The report forecast that the average house would cost £335,000 in 2024 with typical homes in the London, where prices will rise faster than the national average, costing an average of £650,000.

Northern Ireland will see the slowest rate of house price growth at 3.4 per cent a year.

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