House prices to take eight more years to return to pre-recession levels

House prices could take until 2021 to return to their pre-recession peak in real terms despite a shot in the arm from the Government’s Help to Buy scheme, forecasters warn.

Accountant PwC’s latest economic outlook said average UK house prices could rise above their previous 2007 peak before the end of 2014 in cash terms but take another eight years to regain lost ground when adjusted for inflation. House prices have fallen by around 18 per cent in real terms - but only 3 per cent in cash terms - since their peak in the summer of 2007.

“Recent government initiatives to support the mortgage market seem to be having a positive impact in the short term although longer term supply shortages remain a concern,” the report said.

Following the “clear signs of recovery” for the UK economy in the first half of 2013, PwC expects growth to pick up from around 1 per cent this year to around 2 per cent in 2014.