Julian wrote: > >My prediction for the down turn: > >5% in the next 12 months > >30-35% over the next 5 years > >It will be good to see house prices going back to near where they > >should be.
And Adrian replied: > Sorry, Julian, but they *are* where they should be. They always > > are. > House prices are set by the relationship between supply and demand. Agree entirely. Historically the nearest we have come to such a reversal in the housing market was the Thatcher recession of 1991 and onwards. Then housing did fall slightly, and negative equity was a fact of life for many but, since then, house prices have continued to rise strongly. Occasional flattening of the rate of growth should not be seen as negative growth. > > The demand for houses has been going up sharply for several years. > This is because of a rapidly rising UK population (meaning ever more > people wanting somewhere to live), and of late very low interest > > rates (making it possible for a greater proportion of the population to > afford mortgages, and thus enter the market). And also the trend towards single parent families where both adults require housing separately. The only fly in this ointment is that for most, normally-waged, single youngsters the price of the first house is now getting out of reach. There are ways round this (multi- ownership, much longer mortgages, parental assistance etc) but what effect the reducing number of first-time buyers will have is difficult to forecast. I doubt it will be anything like as disastrous a situation as Julian prophesies though. > OTOH, the supply of > houses has been increasing slowly, because of increasing resistance to > turning more of the landscape into building sites. With projections of population growth as recently published I'm not sure where they are going to put them all. If the projections are true, I'm just glad I won't be around to have to endure the resultant crowding and social stresses that will result. > > There may well be a price downturn, because interest rates have gone > up. However, I expect it to be short-lived, because any slowing of > national economic growth (which may be on the horizon) is likely to > cause the BofE to reduce interest rates, and the population continues growing disastrously. Yep, agreed, see earlier part of reply. The BofE is already reported to be under strong pressure from the Government to reduce interest rates, in part because the economic growth of the UK has been shown to be related to the 'feel-good' factor when people feel that they have lots of equity in their house and are thus 'encouraged' to borrow and spend as a result. Roger
