House prices 'won’t recover until 2020', says PwC

Average UK house prices are unlikely to recover to their previous peak levels until around 2020, according to analysis by Pricewaterhouse Coopers (PwC).

Its latest UK Economic Outlook report said there is a “near 50% chance” by 2020 prices will still be less than the heights recorded in 2007, when the average property was worth just under £200,000.

However, the same home is currently worth £160,000, a fall of £40,000, equal to 20% of the property's value at the peak.

John Hawksworth, chief economist at PwC, said: "We expect average UK house prices to drift down further over the next year and then enjoy only a modest recovery over the next few years.

"This reflects the dampening impact of declining real income levels and continued tight credit conditions for first-time buyers in particular."

Meanwhile, the Royal Institute of Chartered Surveyors (RICS) has found house prices fell in June, as demand from buyers remained stagnant and supply dropped back.

"The UK housing market faced a stalemate during June. Demand has been broadly flat for the past six months," RICS said.

"Chartered surveyors report that, because the market remains difficult to access, the only buyers who can really be considered serious are those who have already sold their property or have a mortgage agreement in place."

The majority of surveyors expect house prices to fall over the next three months.

However, both RICS and PwC pointed out London remains the exception. The capital is the only region in the country to experience rising prices, RICS said.

It said: “The UK as a whole faces a slow climb to recovery given the continued squeeze on consumer and government spending.

“We see a distinct regional pattern to growth with the public spending cuts acting as a drag on recovery in Northern Ireland, Scotland, Wales and the North East in particular.

"London and the South East will not be immune to the cuts, but growth there is less dependent on the public sector and more on the international financial and business services sector, in which growth is likely to remain relatively strong.”