Future uncertain for house price prospects

It also says the UK economy is expected to show modest average GDP growth of around 1% in 2010, picking up to around 2.2% in 2011. Public sector job cuts are expected to dampen the recovery but not derail it altogether.

House prices in 2010 may on average be around 5% higher in cash terms than in 2009, but this implies fairly flat house prices in the second half of this year given earlier increases, according to PwC.

The analysis is based on a probabilistic model of UK house prices developed by PwC that allows the uncertainties in key drivers such as household income growth, interest rates and housing supply to be taken into account.

Looking further ahead, the PwC analysis presents probabilistic house price projections in both cash terms and in real terms adjusted for CPI inflation. Over the period from the peak of the market in 2007 through to 2015, the probability that cumulative house price changes will be negative is only around 15% in cash terms, but rises to around 70% in real terms. The latter is more relevant for long-term assessments of this kind and suggests that real house prices may not regain their previous peak levels until around 2020.

The analysis also highlights the high degree of uncertainty over future house price prospects, emphasising that housing is a risky asset that is not guaranteed to generate positive real returns in the future even though this has been the pattern in the past.

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One thought on “Future uncertain for house price prospects

  1. Sir Bashus Moore

    They MAY stay at these levels until 2015, but equally they MAY not !! When will these “experts” appreciate that there are so very many factors impacting house prices, then it is impossible to predict future market performance beyond say 6 months. Look at the impact of the Gulf War & the Faulklands War had on house prices? Was this predicted? No. Accountants should stick to doing sums, and stop trying to forecast the future

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