House prices in doldrums for 8 more years
Filed under: House Prices
So what does the report claim, and why?
SlumpPriceWaterhouse Coopers claims that average property prices won't return to the sort of levels we saw in 2007 until between 2020 and 2024 (after inflation).
The report also highlighted the damage done by the slump so far: if you take inflation into account, prices have already fallen 18% from their peak. The average property is worth just £143,000 - and is set to keep falling until it reaches £138,000 in 2014.
Why?The experts say that the reasons behind the slump are not brand new information: but a result of the collapse of the mortgage market in the wake of the financial crisis and the Eurozone catastrophe. At the same time, low rises in wages and high rises in living costs have also squeezed demand, so prices have gradually fallen.
Recovery?From 2014, prices will apparently start to rise slowly until they get back to their 2007 levels some years later - after 2020.The rise should coincide with some renewed strength in the mortgage market, and pent-up demand from people who have been waiting to get onto the housing ladder.
However, it says that even after this point, we won't see the boom times of pre-2007 again. It explains that the price/earnings ratio was unsustainable at this level - and that the crunch was always going to come. It adds that the mortgage market is likely to recover, but that new regulations and practices mean that money will not be easy to come by, which will keep a lid on demand.
The report also suggests that a typical single person will still struggle to buy before their 30th birthday - unless they have help from family. Their sums assume an individual would have to start saving for a deposit at 22 in order to reach this goal - which is increasingly unlikely given the rise of student debts.
It seems, therefore, that while established homeowners may be lamenting the drop of value in their home, those looking for their first property may have a reason to celebrate as prices continue to fall.