Date:20 August 2009 I Comments: 2 I Views:7,968

Everybody loves a good crisis. People tend to confabulate, conflate, deliberate and speculate as things develop and numerous points of view emerge.

The current house price crash is no different.

It is without doubt a crisis and there are a variety of opinions on the future of house prices.

The general feeling is that prices will continue to fall and there could still be quite a way to go before they bottom out.

But what if this isn’t the case?

The argument for a continued decline in prices is based on graphs of former house price crashes and graphs about the price to earnings ratio, both of which do suggest things don’t look good.

Coupled with the overall picture of the global economy it is fairly safe to say a robust recovery is still some way off but are there any factors that could prevent house prices from plummeting any further?

There has been recent news to suggest prices have crept up in some areas already but such ‘blips’ are common during an overall decline.

There is still a huge demand for houses but buyers have been and are still being stifled by uncertainty and a large proportion of UK homeowners are now either in negative equity, close to negative equity or stuck with a high ‘loan to value’ mortgage and unable to move.

But rates are low and according to recent news they could stay low for many years.

So for people with low loan to value mortgages there is a very real opportunity to upsize and still have manageable monthly repayments.

A fortunate few new buyers with big enough deposits are able to shop around for bargains.

But will the numbers add up to enough prospective buys to prevent prices from falling?

What would happen if house prices do stop falling?

The affordability ratio had been skewed for several years toward the high end before the bubble burst and people were still clambering over each other to buy so is the affordability ratio really a determining factor in the direction of house prices?

Category: Mortgages


  1. Why should they keep falling. Births, deaths, marriages, divorce and a mobile workforce will still keep the sale of properties turning over despite very few new homes currently being built. Maybe we’ll have to wait for the massive “Baby Boomer” generation to drop of the perch and thus raise the supply of properties on the market. Good old Mother Nature.

    The current crisis also seems to ignore the fact that some types of properties bought in the last 3 years have been mug buys whilst others are not too bad. Lenders know this as many of them won’t touch any city centre appartments or any new builds since 2006 but are ok with other types of properties. If you have one of the “mug buys” then the prospect of you selling for what you bought at could be many years away.

    You never know, it just could be no longer afforadble for wannabe home owners to ever get on the ladder again. We have limited land to build on and maybe this current lull is going to be the last opportunity for first time buyers. They say in Germany that everyone rent and maybe thats where we are going in the UK. What they never seem to say about germany is who the landlords are. Pressumably, German tenants pay their rent to someone.

    Answers on a post card please.

  2. To be honest I cant see house prices levelling out any time soon. Granted, there are a few lucky ones who will be able to afford deposits and get themselves on the property ladder, but just because house prices are low doesent mean they are affordable. Many are stuck in negative equity, most simply dont have any money since they’ve taken a pay cut or been made redundant and the remainder will be too young to even think about buying! We’ll probably have to wait until we have an undersupply problem before the house prices start rising again, who knows how long that could take…