• Estate agent survey a false dawn says consultancy
• Buyers not confident enough to join market

Britain’s housing market will stay in the doldrums until the middle of the next decade, and there is a 30% chance that prices will take until 2020 to return to their peak before the crash, a consultancy firm predicts.

PricewaterhouseCoopers said recent signs of a recovery in the market which had been detected by a fresh survey of estate agents were a “false dawn”. John Hawksworth, the chief economist at PWC, said prices would experience a gentle decline for the next 18 months and then pick up slowly over the following years.

“Although the estimated average UK house price overvaluation of around 25% in mid-2007 has now been largely eliminated, our analysis suggests that house prices could still have further to fall over the next year.

“Despite some recent reports of rises, we are not out of the woods yet by any means. It is important for buyers to take a long-term rather than a short-term view.”

He added that house prices were likely to fall by a further 5-10%.

Hawksworth predicted a repetition of house price movements in the 1990s, when a collapse was followed by a long period of little change. “After a recession it takes time for people to get their confidence back and for memories to fade. Credit conditions will remain tight for some time and we expect unemployment to rise for the next year or so. There will be an environment of job insecurity where people are cautious about buying a house.”

PWC said it was more likely than not that real house prices in 2015 could still be below average levels seen in 2008, after adjusting for inflation. Even in 2020, after five years of relatively strong growth, the consultancy saw a 30% chance that real house prices could be below 2008 levels.

In its monthly property snapshot, the Royal Institution of Chartered Surveyors said price expectations rose for the first time in over two years in June due to a lack of homes on the market and an increase in buyer enquiries.

Jeremy Leaf, RICS spokesman, said: “Although the market is showing signs of improvement, it is unlikely that there will be a sustained upturn while mortgage lenders remain risk adverse. A lack of stock on the market is providing a platform for modest price increases. While supply remains tight, the market may continue to show tentative signs of firming but instructions are starting to increase in some regions and this could dampen any meaningful recovery as long as economic conditions remain quite so uncertain.”

Hawksworth said: “What would be a surprise would be if house prices now started to recover strongly in a sustained way. That would go against the lessons of history. There may be the odd month where the market seems to be going up but it is a false dawn because there is no underlying strength.”

He added: “The pace of recovery in house prices seems likely to be relatively modest until the middle of the next decade, although it could pick up again beyond that as supply shortages reassert themselves, credit conditions return to normal and negative memories of the current housing bust fade.”