The average house in London is likely to cost about £500,000 in just a year’s time, according to a forecast by professional services group PwC.
PwC’s latest economic forecasts, to be released today, show that the average property price in the capital is expected to reach £565,000 by the end of this decade, with its chief UK economist John Hawksworth estimating the average price of a property in London will hit £500,000 in 2015.
The analysis indicates that the average UK house price will increase by eight per cent in 2014, and reach £330,000 by 2020. London house prices are estimated to rise by 13 per cent during the year.
The company also suggests that the UK will see economic growth of three per cent this year, roughly in line with market expectations. The forecast suggests that London will lead the way with a 3.4 per cent increase in output.
Despite rapid rises in house prices, PwC concluded that the national property market was not overheating, although the report suggested that “evidence of a bubble in the London market is stronger as borrowers are more stretched on average in the capital”.
Concerns about a potential housing bubble in London is cited by PwC as one factor that may lead to an increase in interest rates, as suggested by the Bank of England in recent weeks. The report said there would be a “gradual upward trend” in rates commencing late 2014 or early 2015 and a return to a more traditional rate of four per cent by 2020.
“Recent recommendations from the Financial Policy Committee focused on restricting the proportion of new mortgages at high loan-to-income ratios seem sensible,” said PwC senior economist William Zimmern.
He added: “But in the longer term, measures to boost housing supply more directly should be the priority.”