House Prices Set to Rise 35% by 2020
In its latest economic outlook PwC, one of the Big Four accounting firms, has predicted that national house prices will rise by 35% over the next six years and that London house price will continue to grow exponentially, easily surpassing the half million pound mark this year.
According to PwC house prices will rise by 8% this year, 5.5% next year, and will then rise incrementally to reach a national average of £276,000 by the end of 2015 and finally climbing to £328,000 by 2020, with house prices set to rise in the capital by 13% this year.
However, the company’s economic outlook does stress that it is important to take into account the fact that these figures, while representing quite substantial cash increases, in real terms, the story is very different:
“We expect to see a gradual recovery in house prices over the next few years. In cash terms, average UK house prices might be back to their 2007 peak level by the end of 2014, although in real inflation-adjusted terms this might not happen until 2021.”
According to the report:
“The UK housing market has leapt back into life. Prices across all regions are accelerating in stark contrast to the generally weak picture (at least outside London) seen until 12-18 months ago,”
William Zimmern, a PwC senior economist said:
“House prices across the UK are accelerating. We do, however, expect the pace to moderate, slowing to around 3.5 per cent between 2016 and 2020.
“We expect the housing market will cool on its own and actually in the UK as a whole we don’t think there is a bubble, however, there is more of a suspicion of a bubble in London and I don’t think the policy changes on their own will have an impact, so the London market needs to be monitored quite carefully.”
The Big Four firm also warns that the development of a Londoncentric property bubble may very well cause interest rates to rise “sooner rather than later”.
The PricewaterhouseCooper report concludes with the ubiquitous rallying cry of anyone and everyone offering comment on the moment: build more houses in order to bring supply in line with demand.