UK house prices 'to jump 35pc in six years’
07-13-2014
“Big Four” accountancy firm PwC believes house prices will increase by more than a third to £328,000 by 2020
UK house prices 'to jump 35pc in six years’, says PWC
PwC expects prices to rise by 8pc this year, with those in London increasing by 13pc. House prices in the capital are expected to jump to £565,000 by 2020
By Szu Ping Chan
The cost of a UK home will jump by more than third nationwide before the end of the decade, while the average price in London is expected to soar past the £500,000 mark by the end of this year, according to PwC.
The “Big Four” accountancy firm believes house prices will rise by 35pc to £328,000 by 2020, from £242,000 at the end of 2013. This means the cost of an average UK home will remain around 10 times larger than the average salary of £27,000 over the next six years, even as income growth returns to its pre-crisis average of around 4pc a year.
“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,” PwC said in its latest economic outlook.
PwC expects prices to rise by 8pc this year, with those in London increasing by 13pc. House prices in the capital are expected to jump to £565,000 by 2020.
PwC economists John Hawksworth and Will Zimmern said “bubbly” prices in London could be a cause for concern, even though the Bank of England has taken steps to try to rein in mortgage lending.
The Bank has told lenders to limit the amount of high loan-to-income mortgages – defined as more than 4.5 times a buyer’s income – to 15pc of new business and “stress test” borrowers’ ability to pay their mortgage even if interest rates were three percentage points higher.
“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,” said Mr Zimmern. “However, there is more of a suspicion of a bubble in London and I don’t think the [Bank of England’s] policy changes on their own will have an impact, so the London market needs to be monitored quite carefully.”
While PwC does not expect the Bank to raise interest rates to cool the market, it said that “concerns about a possible house price bubble could also be one factor causing interest rates to rise sooner rather than later.”
PwC expects the economy to grow by around 3pc in 2014, before easing to 2.6pc in 2015 amid a slowdown in consumer spending growth.