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33% chance of lower house prices by 2010

Thursday, 2 November 2006 12:00 AM

There is a one in three chance of house prices being lower in 2010 than they are now, a leading financial company announced today.

In a study modelling three different scenarios for the UK's property market, the report by PricewaterhouseCoopers also finds that by 2020, there is an almost one in seven (13 per cent) chance of prices not rising above inflation.

Commenting on the findings, PricewaterhouseCoopers senior economist John Raven said: "Despite the recent relative robustness of the UK housing market, potential home-buyers and investors should not underestimate its volatility in the medium term.

"For example, our detailed analysis of historic data suggests that the chance of houses prices in 2010 being lower than they are today could be around one in three."

The other models used for the study show the chance of lower prices by 2010 both increasing and decreasing.

In PricewaterhouseCoopers' "Optimistic Scenario" variant, the chance of prices not beating inflation by 2010 is around one in 14 (six per cent), but using the "Historic Parameters" variant, which presumes current house prices are overvalued, the risk of lower prices by 2010 is as high as two in three.

However, the report argues this scenario is the least likely of the three.

Looking further ahead to 2020, the "Optimistic Scenario" shows there is 99 per cent chance of house prices beating inflation.

The "Main Scenario" model shows that if house prices do beat inflation, they will go up by around 20 to 40 per cent.

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