Average UK house prices not projected to return to 2007 peak levels until around 2017 in cash terms, or around 2024 in real inflation-adjusted terms.
In cash terms, average UK house prices projected to be broadly flat for the next couple of years, but then recover gradually later this decade as supply shortages reassert themselves.
Single people looking to buy their first property are the hardest hit and without financial assistance from parents or family members are likely to be unable to afford to buy until they are in their late 30s.
The firm also forecasts that the UK economy will remain broadly flat in 2012, but is set to recover to 1.7% growth in 2013 as lower inflation eases the squeeze on consumers.
London and the South East of England will lead the economic recovery, but all UK regions should return to positive growth next year.
Average UK house prices should recover later this decade, but are unlikely to return to their previous 2007 peak levels in real terms until after 2020, according to analysis by PwC in its latest UK Economic Outlook report.
The PwC central scenario suggests that, by 2015, house prices will still be around 8% below their 2007 peak level in cash terms and around 24% lower in real terms after adjusting for inflation. In cash terms, the previous peak might not be exceeded until 2017.
By 2020, the analysis suggests that a gradual easing of credit conditions, combined with housing supply shortages, could push average UK house prices back up to almost 30% above their 2007 levels in cash terms. However, this would still be around 7% below their 2007 peak in real terms once inflation has been taken into account.
The 2007 real peak might not be regained until around 2024 in this central case, although there are large uncertainties surrounding any such long term projections.
‘Over the next couple of years, we expect the UK housing market to remain relatively flat while economic uncertainty persists, particularly in relation to the eurozone crisis. This will also dampen down growth in consumer spending over this period,’ said John Hawksworth, chief economist at PwC.
‘House prices should recover later in the decade as confidence is gradually restored, credit conditions ease for first time buyers and underlying housing supply shortages reassert themselves. However, as house prices are likely to stay high relative to earnings by historic standards, and credit is likely to remain less readily available than before the crisis, we estimate that a single person leaving university today is unlikely to be able to afford their first house until their late 30s without financial assistance from their parents or others,’ he added.
Many homeowners who bought at the peak of the market, often with huge mortgages, are now in negative equity because the property is now worth less than the loan.
