House prices peaked in 2007 and despite recent falls the average house price still remains out of reach from first time buyers. Add to that the difficulty in obtaining mortgage finance in the current lending climate; with requirements of clean credit records and large deposits, it is little wonder why more and more people are resorting to renting at present.
Income multiples are still extremely high when compared to previous trends, which would suggest property is still overvalued. Having interest rates at an all time low has helped to cushion falls, to a degree, but is it just a matter of time before the next property crash? What we must ask is what will happen when interest rates inevitably rise?
It has now been predicted house prices will not reach their pre-crisis levels until 2020, according to new research from PricewaterhouseCoopers (PWC).
The accountancy firm said that house prices will still be 12% below their 2007 highs by 2015, and that by 2020 there will only be a 53% chance they will have risen from the 2007 levels by 1%.
It is PWC's view that the average UK house price will drift down further over the next year. This reflects the dampening impact of declining real income levels and continued tight credit conditions for first time buyers in particular.
After 12 years of rising house prices, we Brits may have finally grasped that house prices can go down, as well as up. Hence, we do not expect another house-price boom for a number of years to come and in fact we expect values to ease further.
History suggests that recessions together with widespread banking failures are the worst to recover from. Because excessive debt rises fast but falls slowly, these depressions can take a decade or more to correct. If this is the case, then we are only just in 'the eye of the hurricane', with more hardship to come until 2017!
If you would like further advice with your mortgage, please contact Craig Kennedy at Innes Reid on 01244 347 583.