However, they do say that the pace of decline should be slower than over the past 18 months.
With mortgage lending and housing transaction levels remaining subdued and with unemployment likely to continue rising for some time, the latest PwC UK Economic Outlook suggests that average UK house prices are likely to fall further between 2009 and 2010. But the analysis also shows that there is considerable uncertainty around this outcome. Prices are projected to be broadly flat in 2011 and to recover only gradually after that, but there is a widening band of uncertainty around these longer term projections.
John Hawksworth, head of macroeconomics at PricewaterhouseCoopers LLP, said: “Although the estimated average UK house price overvaluation of around 25% in mid-2007 has now been largely eliminated, our analysis suggests that house prices could still have further to fall over the next year. Despite some recent reports of rises, we are not out of the woods yet by any means. It is important for buyers to take a long-term rather than a short-term view.”
The analysis in the report suggests that it is more likely than not that real house prices in 2015 could still be below 2008 average levels, after adjusting for general consumer price inflation. Even in 2020, after five years of relatively strong growth, there is estimated to be a 30% chance that real house prices could still be below 2008 levels, although this is very unlikely to be the case in cash terms.
John Hawksworth, head of macroeconomics at PricewaterhouseCoopers LLP, added: “The pace of recovery in house prices seems likely to be relatively modest until the middle of the next decade, although it could pick up again beyond that as supply shortages reassert themselves, credit conditions return to normal and negative memories of the current housing bust fade.”
