But according to PwC: “Housing is a risky asset that is not guaranteed to generate positive real returns in the future even though this has been the pattern in the past.”
In fact, PwC says, there is a strong possibility that house prices continue to fall for the next five years and could drop further even beyond 2020. According to the report, this would significantly drag back the speed of economic recovery – which PwC claims faces a risk of a double-dip recession.
The “real terms” forecast by PwC includes consumer pricing adjustments that take into account the goods and services you can buy in 2020 compared with 2007. There is a 70pc chance of prices falling further in real terms by 2015 and a 50pc chance of a continued downward trend by 2020.
“The assumption that property is a 100pc safe asset you can continually borrow against is over,” said John Hawksworth, head of macroeconomics at PwC.
Is there a feasible scenario whereby American property prices grind lower, for 10 years, as well? A lot of people were burned by the crisis, but many remain bullish and ‘bargain-hunting’. Thus it hardly feels like sentiment has reached an extremely low point yet, which one would generally expect to happen around a market bottom.
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