The firm predicted two scenarios which could impact the housing market, a contained spread of Covid-19 and a further widespread outbreak.
It suggested in the event of a contained spread with local and shorter lockdowns, there would be a limited effect on the economy resulting in mortgage lending returning close to pre-Covid levels and low interest rates.
If there is another outbreak and further lockdowns, PwC predicts there will be higher levels of unemployment, more lender caution and a low interest rate environment.
In the contained spread scenario, PwC forecast annual house prices would increase one per cent in 2021 to an average of £239,000. Over a five-year period, it suggested house prices will grow four per cent to £280,000 by 2025.
However if there is a further serious outbreak, it predicts that house prices will fall by seven per cent next year to £218,000 and over a five-year period, only rise three per cent to £245,000.
In either scenario Brexit is expected to effect house prices, the firm added.
The report said: “House prices over the coming years may also be impacted by the UK moving into the next phase of its relationship with the EU and the rest of the world.
“Due to the number of permutations to our scenarios that this structural change could introduce, we assume that an agreement is struck by the end of the year between the UK and the EU in both scenarios, and the transition is smooth.
“If this is not the case, the short- and medium-term impact to UK house prices could be considerable, particularly for some regions of the UK.”
Fifth of people less likely to purchase
PwC also conducted a housing survey with 1,000 respondents and found 20 per cent were less likely to buy a home within the next 24 months than they were before the pandemic.
The state of the job market as well as personal employment security were cited as main factors for the shift, as was a fear around the loss of income and uncertainty towards house prices in the medium term.
The stamp duty holiday has possibly influenced the decision to buy a house for others, as 10 per cent of respondents said they were more likely to purchase than they were pre-Covid.
The survey was carried out before the government revealed its plans for further employment support last month.
Compared to other age groups, the split between those more likely to buy a house and those less likely was the closest among those aged 25-34.
As they tend to be the group with smaller deposits and less secure employment, 29 per cent said they were not as likely to purchase compared to the start of the year.
On the other hand, 25-34-year olds in more stable jobs have been able to save while reducing their expenditure, and now 21 per cent say they are more likely to buy a home.
For people aged 35-44, 13 per cent are more likely to purchase compared to 26 per cent who are less likely.
People over the age of 45 are happy to stay put as just two per cent of over 65s are likely to purchase, compared to five per cent of those aged 55-64 and nine per cent of those aged 45-54.