Average house prices in Oxfordshire are set to break through the £300,000 barrier in the next three years, experts have predicted.

Analysts at think tank Oxford Economic Forecasting (OEF) said a combination of increased demand for homes, limited supply and growing prosperity are fuelling the price increases which are set to grow steadily in the next few years.

The latest official average Land Registry figure for a property in Oxfordshire is £257,528 but demand is such that prices in some areas are already going through the roof, according to agents.

Alan Wilson, director of consulting services at OEF, said: "While house price inflation is lower in the South East than nationally, it will reach seven per cent by 2009 and so prices will reach £300,000 in Oxfordshire by then.

"Earnings are rising by about 4.5 per cent a year which means more household wealth, consumer spending and confidence is expected to be strong.

"Some of that translates into house buying, while supply of properties looks subdued."

Judith Durham, residential sales manager at Cluttons estate agents, said prices in parts of Oxford itself were now as high as London.

She added: "We are fielding inquiries from London buyers but they are finding themselves in a queue of 10 people wanting to buy the same property.

"It is a question of supply and demand - Oxford is a small city and there is not enough housing stock on the market."

The OEF report produced for the National Housing Federation, the trade body for housing associations, showed national prices will rise by nearly 50 per cent between now and 2011 to leave the average home costing £286,500.

The federation warned that the average house price in England was already eight times average earnings, and by 2011 it would be 9.2 times the average salary.

David Orr, chief executive of the National Housing Federation, said: "High house prices are already having a disastrous effect on local communities.

"Over the next five years we'll see home ownership being pushed further out of the reach of middle earners and even those on relatively high incomes."