The latest outlook for house prices to 2020 by PricewaterhouseCoopers (PwC) suggests that the UK housing market will be somewhat stagnant for the next decade or so.

The PwC model projects that there is only a 12% chance that real house prices will achieve their 2007 peak levels by 2015 and that this improves only to 53% by the year 2020.

But that 53% chance will in all probability only mean a real inflation adjusted price increase of just 1%.

After the credit crunch house prices fell back to a low of between 20%-25% of their 2007 prices in March 2009. But then, to many peoples’ surprise, prices rallied and recovered across most of the country. In the London area the recovery was most marked with prices going back up 23% but in the North of England it was only a paltry 1%. Wales saw a rise of 8%, Northern Ireland 9% and Scotland 22%.

But now this recovery has flattened out and is even in decline says PwC, which will drive future house prices.

The report puts this down to several factors.

On the one side falling average household disposable income, higher than average unemployment and tightened credit conditions when compared to the pre-credit crunch era is dampening demand.

This is despite that on the supply side housing supply has declined since 1999, especially since the 2007 credit crisis. But this has been balanced out by an increased number of distressed sales coming to market.

There is also the unwillingness of those that bought at the market height to now sell in depressed times, even if their next purchase is also at a relatively low price. This is presumably because many may have high LTV mortgage issues.

The report concludes that house prices are still weak and vulnerable to shock and there ‘… is likely to be a long and bumpy road to full recovery’, not just for house prices but also for linked businesses and the wider economy.

The Outlook for UK House Prices to 2020 is one part of PwC’s UK Economic Outlook July 2011.

Labour? LibDem? Conservative? Other? Who would you choose in July 2011? Vote in the new poll HERE!

Comment Here!