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PwC: Latest UK Economic Outlook report has house prices recovering in long term
July 13, 2012
By Rob Starr, Content Manager, Big4.com
Average UK house prices should recover later this decade, but are unlikely to return to their previous 2007 peak levels in real (inflation-adjusted) terms until after 2020. By 2020, the analysis suggests that a gradual easing of credit conditions, combined with housing supply shortages, could push average UK house prices back up to almost 30% above their 2007 levels in cash terms. However, this would still be around 7% below their 2007 peak in real terms (once inflation has been taken into account). The 2007 real peak might not be regained until around 2024 in this central case, although there are large uncertainties surrounding any such long-term projections.
This comes from analysis by PwC in its latest UK Economic Outlook report.
The report projects GDP growth of around zero in 2012 as a whole, but picking up later in the year and rising to around 1.7% in 2013. Consumer spending growth of around 0.1% in 2012 and 1.3% in 2013 is expected as inflation falls back, easing the squeeze on real disposable incomes that led to a 1.1% fall in real consumer spending in 2011. Structural shifts towards online spending will continue to pose significant challenges for traditional high street retailers.
“Recovery in the UK has stalled over the past year as the eurozone crisis has taken its toll. However, while official data suggests that the economy fell back into a technical recession in the first quarter of 2012, labour market and business survey data suggest continued modest growth,” says John Hawksworth, chief economist at PwC. “The outlook for the UK as a whole remains cloudy but with scope for improvement – with GDP broadly flat in 2012 but picking up in 2013. We expect London and the South East to lead this gradual recovery, but all regions are projected to see at least moderate average growth in 2012 and 2013. ”