House prices in the UK may not take more than 10 years to return to a peak last seen before the global economic downturn.
Financial consultancy PricewaterhouseCooper’s (PwC) claims the ongoing eurozone financial crisis is dragging the UK market down and slowing recovery.
UK house prices have fallen an average 18% since 2007, with lending restrictions from banks and building societies stopping many buyers from entering the market.
PwC ‘s research suggests prices may claw back to their previous high by 2015, but in real terms, values will be lower.
The scenario shows a modest decline in growth in 2012, picking up into 2013, but shows a general lack of confidence over job stability and future earnings, linked with worries about more house price falls seems to be stopping many buyers from moving.
This declining confidence is hitting the market as a lack of demand, which is another factor stopping prices from increasing.
“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.
“There is an urgent need for new rental properties as young people will, in all probability, have to rent for longer. Moreover, an increasing number of people are likely to be unable to participate in the private housing market without affordable rental housing or government assistance. Policy is needed to support and encourage investment in houses for rental.”
The research also reveals the age of first time buyers is likely to continue to increase.
“Funding a house purchase through debt has already become more difficult given the need for a larger deposit and because house prices to earnings ratios are high,” said the report.
“This trend is likely to continue and will mean that the average age of a first-time buyer is likely to increase and as a consequence young people are likely to spend longer renting and saving.”
