The study, carried out by Cebr, estimated by 2017 the average UK house price would be £254,000, or 11.9% higher than the Q3 2007 peak of £227,000 and 17% higher than 2012.
However, it expected borrowing conditions to remain strict with only 674,000 mortgage approvals in 2017 compared to 1.25m in 2006 and the average LTV ratio for homeowners to continue to hover around 70%. The value of gross mortgage lending is projected to be £212bn in 2017 against £363bn in 2007.
The study also found the housing supply was likely to be depressed compared to pre-2008 levels.
Legal & General Mortgage Club managing director Ben Thompson told Mortgage Solutions at The Mortgage Event yesterday the study confirmed the housing market had reached the bottom: “In a very difficult decade, we’re now pulling towards recovery, towards a new normal, as we’re calling it, in 2017.”
The first step towards recovery was brought about by the Funding for Lending scheme, he suggested. “I know some are very quick to say it’s just going to help rebuild balance sheets but what I will say first hand is some people have some pretty bullish aspirations for next year.”
Affordability is expected to have improved by 2017 thanks to disposable income growth catching up with house price appreciation – the average house price to disposable income ratio in 2017 was estimated to be 5.8, compared to 6.5 a decade earlier.
But the level of homeownership was forecast to drop to 1980s levels of 57% compared to 68% at the 2007 peak.