L&G says 2017 will see “new normal”
The prediction was disclosed in the Legal & General housing report which also said it expects saving for a deposit to be more difficult by 2017 as cash ISA saving rates are also expected around 3 percentage points lower than in 2007.
The report said: “We estimate that the housing market is unlikely to recover until 2017 at the earliest. In this study the housing market is defined as having recovered when the factors outlined above return to pre-2008 financial crisis levels.”
In 2017 the average UK house price is forecast to be £254,000 which is 11.9% higher than the quarter three 2007 peak of £227,000.
And by 2017 UK house prices are forecast to be 17.0% higher than this year in which house prices are forecast to average £217,000. The report expects prices to fall or remain broadly flat until mid-2013, after which, house prices are forecast to climb to £227,000 by 2015.
House prices are expected to grow at an average of 4.1% per year between 2017 and 2027 compared to 11.4% per year between 1997 and 2007.
Average house price appreciation is expected to be £12,000 per year between 2017 and 2027 in nominal terms. The decade of 2010-19 is forecast to have the weakest house price growth on record since the 1950s.
Borrowing conditions are expected to remain strict compared to the ‘pre-2008 financial crisis’ period. It is forecast that there will be 674,000 mortgage approvals in 2017 compared to 1.25m in 2006 peak. This is equivalent to 1,600 daily mortgage approval transactions compared to 3,900 during 2006.
The value of gross mortgage lending by 2017 is expected to be £212bn compared to £363bn in 2007.
Loan to value ratios for first-time buyers are expected to be around 85% by 2017 compared to 80% in 2012 and 90% in 2017. The average LTV ratio for homeowners is expected to remain at around 70% until at least 2017.
And continued restrictive borrowing conditions and lower transaction activity mean that the average time taken to sell a home is expected to be 9-10 weeks in 2017, which compares to 6 weeks in mid-2007.