House prices may not regain 2007 peak for a decade

There is so much talk of "recovery" but has anyone paused to consider why house prices should return to their 2007 levels? The boom was the result of too much capital chasing too few properties leading to a massive bubble. Unless we have devastating inflation prices should fall much further and stay at their deflated level to reflect their historic link with average incomes and affordability.

I'm not sure there is anything new here in terms of risks. Various commentators have been saying for a number of years that people should not expect guaranteed increases. Also, it would appear that these are all statistical based outcome and I could probably have told you there is a 50% chance house prices are going to fall for a number of years. Equally, no pun intended, there is a 50% change it is going to go up. Finally, you can't just say in real terms there could be house price falls for 10 years without justifying or explaining what your assumptions are regarding inflation, interest rates, the economy, population growth, housing supply, the weight of money in the sector for the next 10 years. My limited statistical knowledge tells me one should never try to extrapolate statistical results more than 3, may be 5, years out because the inherent risks in statistics would become greater further out you try to do that - just look at the fan charts the Bank of England puts out in their reports.

Asking prices for houses in the North West are drifting downwards, and actual prices achieved in sales are 10% or 15% less. It wont take much uncertainty in the jobs market to increase this trend. I am near a development where about 30% of BtL apartments are lying empty long-term, so there will be downward pressure on rentals too. Just add a little to interest rates and the whole pack of cards will collapse.

Much has been said about the supply/demand influence on house prices.However the real supply/demand syndrome lies in the supply and cost of money. It could well be that the cost of funding an interest only mortgage will shortly increase by up to 50% (which would still imply interests rates no higher than long term normality) If the funding cost goes up by 50%, surely it is inevitable that in an austerity environment, people will seek to downsize to survive. You then have the opposite of the housing ladder, it becomes a housing slide.

"PwC draws attention to the striking lack of uncertainty"....

lack of uncertainty = certainty.

do you really mean certainty or have your editors snorted a bit much hyperbole for the day and have left an overexcited double negative in???

accountants should stick to what they know and not be tempted in to the voodoo of the prediction of the direction of asset prices. that is if they want us to take them seriously. Maybe PwC has come to this conclusion because they have decided to finally report a true and fair representation of the financial affairs of our nation's banks :)

Price of land has dictated how house prices are costed the right type of property at the right price sells many people cannot afford losses that could happen if house prices decline further ,so a sideways movement in prices without drastic changes would be the way ahead ,land prices have increased as everything else has so land banks that builders obtained could have to be mothballed for the present ,inflation is the key to trying to predict the future it is on track to fall ,

I've long held the view that prices will halve in real terms over the next 10 years. Irresponsible lending fuelled the boom so how does anyone propose that the market can recover to its peak (where is the money going to come from)? The odds of this happening within the next 10 years seem to me to be zero.

Why not make it 20 years.During the two decades we can analyse the collective stupidity that allowed house prices to reach the obscene levels that it did.After that time perhaps future generations can proceed in a saner fashion for the benefit of all.I always like a good fairy story.

"In our opinion the Group financial statements give a

true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31December 2006 and of its profit and cash flows for the year then ended"

This is PWC's 27/2/06 audit report on Northern Rock's 443M profit before the same firm gave audit reports on losses of 119M, 1309M and 277M for the three following years, and 6.5 months before the bank collapsed.

Rubbish. My own house (W London) is within 10% of the 2007 peak. It might not be the same story in say; Sunderland, however, the market allways finds it's own level. Most price drops have been from overpriced city centre flats built for the BTL markets and are now difficult to re-mortgage without a buyer having a large equity position. Family houses have faired much bettter and housebuilders are now in the process of changing permissions from flats to houses as they see demand building for this safer sector.

I absolutely agree Roger

Just stop rocking the boat for a few more months please.

I'm trying to sell a place, so far three deals have gone bad, and all because of people talking the market down and not having the money.

Start talking it up please.

a remarkabkle lack of economic analaysis, coming from such an august source. Have they perhaps considered what effect the lowest interest rates in history coupped with rising inflation will have on asset prices, which presumably includes house prices, once the economy starts to grow again?

in the NE if you want to sell a property fast you would need to knock of 25% to 30%

thats a fact im buying property at present

and I do think it will take 10 years to recover

But rents are good im not selling

As Ive said before im one BTL landlord who has never had it so good and ive been in the market since 1982

IN 1970 with an income of £2,250 per annum I bought my first home for £5975, interst rate 6.5%(more or less 3x salary). That house is now valued at £245000. My salry would be about £45,000 for same job so 3x would be £135000. BUT interst rate now only 3.25% gives £270,000(in terms of affordability) plus now a partners income would be consided as well. Where's the problem? In 1970 we built about 250,000 homes with a pop. of 52m. this year 120,000 hoses or less pop. 60m. Enough said. The real problem is the rental market which, unlike 1970, offers no security of tenure and forces people not on 45000 a year to buy to get that security. Anecdotal evidence suggests that, particularly in big cities, tenants are given notice by landlords, who are speculating basically, every year or so.

They might not, but then again they might. There is not enough review of previous headlines for anyone to take any notice of anything speculative that is written here. It wasn't long ago that the £ would equal the € in a few months was predicated, so can we stop having speculation and have some informative fact based journalism instead?

I bought my first house in 1979 in SW London. I was 23. I had been saving since the age of 18 and had accumulated a substantial deposit. In those days, the Building Societies used to lend money that was already on deposit within the Societies (No Money Market Lending etc...) Unless you believe that we are going to return to a time when people borrowed only what they could afford, and Lenders lent only monies they already had on Deposit to borrowers, and that the financial instruments that have been in use since the 80's to leverage borrowing are going to disappear, then house prices are not going to collapse, or even come down by much. At worst, I see house prices moving sideways or down a little. More likely they will move sideways then up again as the economy recovers, particularly properties in good areas of the South-East of England, and London.

If you're talking house-prices you've also got to consider rents, for example houses might be difficult to sell while there's a mortgage famine, but they can still be rented out more and more profitably 'cos people gotta live somewhere not in trees,,,

...i'd say this report is complete rubbish, firstly from my own small sample: my mate's house in fulham was valued at 850k to sell or 850per week to rent out, at market peak; the other day its rent-out was valued at 1100per week, sale price not quoted..

...but who needs to sell if you can rent out at that level!?

and secondly because the trend in house prices depends totally on where you're looking and what you're measuring...

Anonymous 4: That maths only stands up for an interest only mortgage. If you went for a repayment mortgage like the vast majority of homeowners, you would find that half the interest rate does not equate to half the payment, therefore you would not be able to afford double the amount. This is the logic mortgage lenders use to calculate what they will lend, so you would not be able to borrow 6 times your salary. The main problem for first time buyers is that even if they were in a position to borrow the £270k you mention, they would still need a £30,000 deposit.