An Englishman's Home

Whither house prices? There's never a dull moment in the UK housing market. Recent stats have shown that our prices, already bloated, are moving upwards again. Will that continue? Is it time to swallow hard and move from renting to buying?

Not in my view, at least not for the next year, and possibly longer. Consider the following:

• If you are a first-time buyer in the UK who does not have rich parents or relatives to help you, then you are in a group whose mean age is 37. Even if you do get help from Dad, you are on average 31.


• House prices are still well above their long-term average expressed as a multiple of average earnings


• Mortgage funding, although improving slowly, is still very tight and will remain so while the banks continue to build their balance sheets.


• A UK election in the middle of next year will give potential buyers (and sellers) the jitters. In uncertain times people tend to stay put. Although this will hurt supply, it will also hurt demand.


• At some point, the cost of money is going to rise, and with inflationary pressures building, this may be sooner than later.


• Unemployment is still climbing and although the rate is slower than forecast, it will continue to climb for a while yet.


• The stamp duty reduction for prices below £175,000 finishes at the end of this year, although the pre-budget report may extend that, given the increasingly desperate tone of government.

The fundamentals from the data above point to a 20-30% crash. But my gut feel is that they will fall by 10% or so because of counter-pressures:

• Inadequate supply of new and existing housing.


• A desire on the part of government to retain the entirely artificial 'feel-good' factor that comes from houses that are ludicrously overpriced, reflected in policy, such as key worker projects, provision of 'affordable' housing that allows general prices to remain inflated, and harebrained co-funding schemes.

I've got a nice house near Winchester. No forward chain. Anyone want to buy it?