Prices in Doldrums for 5-10 years

The latest report from accountants Pricewaterhouse Coopers (PwC) indicates that there is a real chance that house prices could remain unchanged in not only the next 5 years but also the next decade.

PwC have suggested that their research indicates that there is a 70% chance that UK house prices will still be below peak 2007 levels in 2015 in real terms. This is despite a continued and expected recovery in real terms housing values.

Looking further ahead to 2020 they predict that there is a 50% chance that real house prices in 2020 could be below 2007 levels.

Property Hawks view

I tend to agree with PwC's sentiment. Only today the FSA announced that self certification mortgages are to be outlawed. All this indicates that the era of easy cheap credit which had much to do with the house price bubble is over. At least for the next 20-30 years. It also calls into question the findings of the Barker Report which found that UK house prices rose by 2.4% above the rate of inflation on a historic basis.

My view is that prices will stay flat over the next 5 years as the deficit is cut and the economy is rebalanced towards private sector growth. Assuming the Coalition can achieve this then I think that the second half of the decade could see the UK housing market return to growth and with a surprising amount of vigor.

Implications for investment strategy

The implication is for landlords and property investors in honing their investment strategy is not to rely on a short term bounce back in house prices. Landlords should be focusing on income generating investments with strong cash flows.

Landlords should be looking at getting a good deal and remember the essential 3 Pillars of Buy-to-let.

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