Despite rafts of positive housing market data emerging in the UK, a full recovery won't actually occur until 2021, according to PwC's latest Economic Outlook report. It claims that while house prices will be seven per cent above their 2007 peak by 2015, based on Office for National Statistics data, when adjusted for consumer price inflation, they will actually be 15 per cent lower in real terms.
In cash terms, rising earnings, improved credit conditions and housing supply shortages will help to drive house prices 35 per cent above their 2007 level. Yet this will remain three per cent below their peak in real terms. Not until 2021 will consumer price inflation adjusted values reach 2007 levels, but this remains uncertain due to the nature of long-term projections.
Meanwhile, PwC claim the disparity between London and the rest of the country won't ease over the next eight years. The capital has enjoyed a much more stable growth rate than other parts of the UK, not to mention a higher value average. The performance of eastern and southern regions has also been in stark contrast to more northerly and westerly areas. This can clearly be seen in the case of Northern Ireland, which experienced rapid growth between 1997 and 2007, but has since witnessed a 60 per cent price drop in real terms. Conversely, London has only seen prices drop by around nine per cent - around half the rate of decline for the UK as a whole.
However, PwC believes that the recovery is starting to spread to other parts of the country, albeit it at a very different rate to the capital. John Hawksworth, chief economist at PwC, said: “Over the next few years, we expect the recent gradual recovery in UK house prices to continue, although affordability will remain an issue for many first time buyers. While mortgage approvals are picking up gradually, housing completions remain subdued. And although recently introduced government initiatives to support the mortgage market are likely to boost demand in the short term, in the longer term other measures will be needed to address more fundamental problems related to lack of housing supply."
- Monday 15 July 2013