UK Economic Outlook: July 2012
Outlook for UK housing market

Our projections suggest that the UK housing market is likely to remain relatively flat over the next couple of years whilst economic uncertainty persists and real income growth remains slow. The crisis in the Eurozone remains a key downside risk in the short- to – medium term.

Later in the decade, we would expect supply shortages to reassert themselves and house prices to recover accordingly, helped by a gradual easing of credit constraints. Nonetheless, our model suggests that nominal house prices are unlikely to exceed to 2007 levels until the second half of this decade, and in real terms (after adjusting for Consumer Price Indices (CPI) inflation) pre-crisis peaks may not be regained until after 2020.

Our calculations suggest that, without significant financial assistance from parents or others, a single person today may not be able to afford to buy their first house until their late 30s. Young people will need to rent for longer, which suggests that there are growth opportunities in the private rented sector.

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