The UK housing market is overvalued by 20 per cent, according to a report released today.

The UK housing market is overvalued by 20 per cent, according to a report released today.

The National Institute of Economic and Social Research claims that limited supply tied in with high demand and low interest rates has brought about the overvaluation.

The institute's study also claims that the economy will enjoy a continued recovery this year, growing by 2.3 per cent compared to 1.7 per cent last year.

Improved growth in investment, government consumption and household spending are behind the expected rise in figures, which is still below trend.

Despite predicting a continued rise in consumer spending this year, following on from the 1.8 per cent improvement in 2005, the report predicts that unemployment will rise to 5.4 per cent by the end of 2007.

The figure stood at five per cent in November last year.