Knight Frank has predicted that UK house prices will not reach their 2007 peak until 2019, making it the longest housing market recovery on record.
Transactions levels have roughly halved since the last market peak in 2007, according to Knight Frank.
Transaction levels are currently 35% below the 20- to 30-year average, and Knight Frank predicts transaction levels will rise by only 2% in 2013, remaining well below peak levels until 2020.
Knight Frank expects no price movements in central London next year, due to tax changed weighing on the market.
Head of Frank Knight’s UK residential research Gráinne Gilmore says this is due to first-time buyers and those further up the housing ladder struggling with tighter mortgage lending rules.
“The fundamentals suggest that a further correction in prices is needed, as the relationship between average earnings and average house prices is well above the long-term average.
“Some five years after the start of the financial crisis, the housing sector in the UK still does not bear the hallmarks of a fully functioning market,” says Gilmore.
This forecast does not come as a surprise, PricewaterhouseCooper predicted in July this year that the UK housing market will not return to pre-GFC conditions before 2020.
The PwC report predicts that UK house prices will be up by more than 30% in 2020 compared with 2007. However, this would be 7% below peak levels when inflation is taken into account.