Housing prices won’t return to 2007 levels until the mid-2020s according to PwC’s latest UK Economic Outlook.
In nominal terms, house prices could return to peak levels by the middle of the decade but in real terms, the progression is likely to be considerably slower as the ongoing sovereign debt crisis in Europe continues to present a key downside risk.
House prices have fallen by an average of 18% since 2007. In the long term, growth is predicted to remain substantially more subdued than in the run up to the crisis.
PwC’s central scenario shows a modest decline in growth this year, picking up into 2013 but uncertainties surrounding potential buyers’ employment and earning prospects, couple with the fear of sustained falls in prices are predicted to present further headwinds.
The drop in lending is also cited as a cause for concern, fuelled by weak demand, uncertainty about the future and increased requirements for credit.
These downwards pressures are being met by an unwillingness on the part of potential sellers to risk their properties in the current economic climate along with a shortage in the supply of new houses.
“A shortage of houses is keeping prices high and is likely to continue to do so despite difficulties with accessing finance,” says the PwC in the report. “The growth in housing stock per person has been falling since the 1970s and is now negative.”
Government subsidies for affordable housing have been slashed by 63% since the beginning of this parliament, contributing to this slowdown.