The risk of a house price crash is relatively low, according to the latest research from PricewaterhouseCoopers (PWC). It says that the risk of house prices being lower in cash terms in 2010 than today is around 1 in 5, with a slowdown in the rate of inflation much more likely.
The report says that house prices are not in fact overvalued as much as previously thought, due to supply constraints not being taken into account. The most likely scenario on this model is that house prices will continue to rise slightly faster than general consumer price inflation, but well below the double digits of increases seen in recent years. In the longer term, however, the model projects that house prices will continue to rise significantly faster than general consumer price inflation over the period to 2020.
The report also says it expects interest rates to remain on hold in the short term but then fall back next year as growth slows.