UK house prices won't recover all they lost until 2019 (2031 if you strip out inflation) according to a new report by global estate agency Knight Frank, which would make it the slowest recovery ever witnessed by the UK housing market. The firm predicts continued "slow erosion of values, and also said that a further correction was necessary in order to allow first time buyers – the life-blood of a healthy housing market – back and buying again.
Grainne Gilmore, head of UK residential research at Knight Frank, said: "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 [property] market."
"Transaction levels have roughly halved since the last market peak in 2007, and are 35pc below the 20-year average, as first-time buyers and those further up the housing ladder struggle with tighter mortgage lending rules."
The firm pointed to the Halifax house price index, which showed prices down for the fourth consecutive month in October as they fell 0.7% compared to September leaving prices 1.7% lower than October 2011. Gilmore predicted another 1% decline in 2013 before beginning a slow painful recovery in 2014.
The forecast is based on the assumption that "the Eurozone remains intact", she added.
Knight Frank is not the only one with glum expectations for the UK housing market.
"Any significant turnaround in house prices still looks some way off, despite the economy seeing a better-than-expected rebound in GDP growth in the third quarter." said Howard Archer, chief UK and European economist at IHS Global Insight.
"House prices are likely to stay under pressure from persistent limited market activity, still low and fragile consumer confidence, and muted earnings growth," Archer added.
But a stark warning comes from Miss Gilmore, who says that the weak mortgage market is not just a post-crash blip, but "the new normal" - a new normal that will leave the market struggling to get back to normal any time soon. This is reflected by other reports, including recent data from MoneySupermarket, which showed the banks actively pulling away from property lending, especially to first time buyers.