House prices 'not likely' to recover fully until 2020

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House prices are unlikely to recover to their previous peak levels until 2020, according to the latest UK Economic Outlook from PricewaterhouseCoopers. Even then, the analysis suggests there is just a 50 per cent chance of a real house price rise relative to 2007, when prices reached their peak.

Over the next four years there is only a 12 per cent chance that real house prices will have risen back above their 2007 peak, according to PWC's analysis. In fact the median projection up to 2015 is for a 12 per cent real decline.

There is further depressing news for property owners in the RICS June 2011 UK Housing Market Survey published today. It reports a stalemate during June, as demand failed to pick up and the supply of new property fell back.

RICS' housing spokesman, Alan Collett, said: "The housing market was pretty flat during June. Buyer interest in purchasing property remains relatively low across much of the UK and the volume of new stock coming to the market has slackened. With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue."

John Hawksworth, the chief economist at PWC, said things would get worse before they improved.

"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," he said.

London prices did, however, continue to buck the downward trend according to the RICS figures. PWC said London and the South East would lead the economic recovery.