House prices to fall but Scotland 'will avoid recession'

House prices are set to fall in Scotland amid an economic slowdown but a recession will be avoided, according to new figures.

Leading accountancy firm PwC has downgraded its growth forecasts for Scotland's economy.

However, its UK Economic Outlook report suggests house prices will rise sharply after two years and reach an average of £156,000 by 2020.

PwC said Scotland was "skirting very close to recession".

The firm also said "vastly more" affordable housing should be built to help first-time buyers get on the property ladder.

PwC had forecast 1.8% growth in their March report. That has now been revised down to 1.3%.

Brexit deal

The rate of growth is predicted to fall to 0.3% in 2017 - but the economy in Scotland should avoid going into recession.

The firm cites a slowdown in business investment from overseas as a reason for the fall.

Meanwhile, PwC said the Scottish housing market will go into decline for the next two years - bucking the UK trend - before rising again in 2018 to record high levels.

Lindsay Gardiner, regional chairman at PwC in Scotland, said: "Given what we are seeing here and in the recent Fraser of Allander report, Scotland is skirting very close to recession and while it is going to be a challenging few months, the country should avoid it.

"As the UK now has a new cabinet and PM, who has stated she will proceed with Brexit, there is less uncertainty now than there has been for a few weeks and that is a good thing but there is still much uncertainty ahead as we now enter the areas of working out the best deal for the UK with Europe and what potential spin-offs that may mean for Scotland.

"While our modelling sees the UK avoid recession, it would be prudent of businesses to make plans for recession scenarios, where they can."

'Generation rent'

Adam Turner, government and public sector assistant director at PwC in Scotland, added: "The picture on housing is sobering and timely as we see the end of the right-to-buy scheme at the end of this month.

"The only long-term solution for Scotland is to build vastly more affordable, quality housing in the places where people want to live.

"This could eventually lead to a situation where earnings growth again starts to outstrip house price growth, sustainably bringing down affordability for those stuck in generation rent."