The housing market is not expected to recover until 2024, a report by Pricewaterhouse Coopers has said.
It says it will take until then for average house to return to 2007 levels – meaning that we are only five years into a 17-year downturn.
It adds that in strict cash terms, house prices should climb back to the peak levels of 2007 within the next five years, but with inflation taken into account, house prices will not reach 2007 levels for another 12 years.
The PwC report says: “The UK market is likely to remain relatively flat in the short term whilst economic uncertainty persists, particularly in relation to the crisis in the eurozone. But house prices should rise again later in the decade as supply shortages reassert themselves.
“Average UK house prices are unlikely to return to 2007 levels in cash terms until the middle of this decade at the earliest, and in real terms, not until after 2020.”
The PwC report is, however, positively cheerful compared with Money Week, which says that a ‘dark phase’ is on its way, with property prices set to slump by 30% – and to stay that way for years, due to a ‘critical flaw’ in the market.
Brace yourselves if you want to read more of this gothic horror (but we suggest you don’t show it to your clients, even if you are trying to get them to reduce their asking prices).
We are also happy to point out that this doomsday piece of journalism features A LOT OF CAPITAL LETTERS, not to mention Japan:
https://tinyurl.com/74lvr25
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Comments
17 years? not 16 or 18 and a half, just a PR non story to promote the accountants, bankers have a lot of them too!
"Repossessions will happen if the banks have no choice but to follow through on all of their suspended possession orders and their "forbearance" goes out of the window.
It certainly could happen.
The questions are: Will it? and When?"
In the '90s, the banks had enough capital reserves to repo all those behind on their mortgages. At the moment though, they don't. New international regulations mean they need to hold even more in reserve too.
It's obvious that the split between savings and loan rates are massive though. That is all part of the banks recapitalising themselves. There will come a time when they can afford to downwrite the significant amount of poorly performing property loans on their books. Something like one in eight outstanding mortgages in the UK are currently subject to forbearance. That level of generosity is unprecedented and cannot continue indefinitely.
The Money Week article is hilarious by the way.
Only for the way it is written - I'm one of the most vocal (and sensible) doomsayers on the site (taking out the HPCers) and I think the tone of impending mutually assured destruction is quite superb!
But whilst I think the language used is thoroughly inflammatory and a few of the assumptions are a bit too speculative, the conclusions are not without at least some merit.
The basic idea is quite simply - if the property market goes "pop" it will go "POP!" in a very big way.
Values have already reduced by about 10% because of the effects of inflation.
Prices will fall if repossessions flood the market like they did in the early 90's.
Repossessions will happen if the banks have no choice but to follow through on all of their suspended possession orders and their "forbearance" goes out of the window.
It certainly could happen.
The questions are: Will it? and When?
As long as we avoid a price crash (which could happen if the Euro goes POP!) then I think the PWC report is probably fairly accurate.
The boom-bust cycle is approximately this long peak to peak - think 1988 - 2007 or 1970 - 1988. There are similar cycles evident back for several hundred years, but the figures are obviously harder to see.
So, 2007 - 2024 with 3 years for the next BOOM seems sensible.
In fact, one wonders if the writer worked that out first and fitted the facts around that premise.
Get prices right and anything sells .....Simples ;-)
Japan
Should appeal hugely to dave the farmer then!!