News & Views Blog

I agree with your assessment. The doom-mongers are being proved wrong and steady house price growth in line with inflation makes it easier to buy and sell without feeling rushed into decisions because prices are going up so quick.

I would like to note that based on the majority of people going to the propertyfinder.com web site interested in buying property the likelihood that more people anticipating price rises is likely to be relatively high.

Most people appreciates that the value of houses are too high, and if its not this year we will see a reduction to overall property prices, its more than likely going to happen next year. As with every business cycle, there is a peak, and then a correction. At the moment a correction has been long in the waiting, and the longer the upward direction of prices, no doubt will mean that it will result in a greater fall.

Refer to the economists, Roger Bootle, from Capital Economics; Pam Woodall from The Economist; Tony Dye from Dye Asset Management (who predicted the last downturn), amongst many others who predict a correction is coming soon, and look at a few other underlying issues:

> Cost of living increasing (council tax and utility bills have risen at a greater rate than inflation)
> Salaries need a huge amount of catching up to do to.
> First time buyers not only require greater savings for a deposit, but also the increasing cost of stamp duty.
> People are borrowing more than thay can really afford. and now it takes more than 5 years on average for the first time buys to get onto the property ladder, up from 2 years of savings it took to build a deposit ten years ago.

Greg raises some interesting issues but as always there are at least two sides to every argument.

I don't think it is necessarily true that just because you want to buy a house you expect house prices to rise. At Propertyfinder we have been tracking the opinions of our users for over two years and there has been a clear correlation between consumer expectations and what has actually happened, making our survey a good forward indicator. During 2005 the majority of respondents to our survey expected prices to fall in the next twelve months and this is the first month since May 2005 that there has been a clear majority expecting increases.

It is true that house prices are at a high point in the cycle relative to some other indicators but this does not necessarily mean there will be a 'correction' (ie a sustained fall in prices) as there was at the end of the 1980s boom. We appear to be in a period of relative stability in the housing market where prices are rising at a similar level to price inflation but below wage inflation and this will help to improve affordability.

Whilst there are factors which point to house prices being too high, there are other factors which counterbalance - low interest rates, increased demand due to smaller family units and net migration into the UK etc. I suffered myself in the 1980s crash but at the time my mortgage rate rose to 15%, which is unheard of today. There can always be an unforeseen disaster around the corner, but currently the conditions are right for stable prices.

In January 2004 Roger Bootle was predicting a collapse in the market by the end of 2004 and further falls in 2005 and 2006. In March 2005 he was predicting a fall of 20%. By the end of January this year he had revised this forecast to a 5% drop over the next two years. Given that he has always been one of the most pessimistic of forecasters while the optimists are predicting modest rises, overall it points to a period of stability which is good news for house buyers and sellers. Fears of a crash significantly slowed the volume of housing transactions in 2005 which was damaging for all businesses associated with home-moving. House buying and selling, and follow on spend on DIY, furnishings etc drives a significant part of the economy and there was a risk that the predictions could become a self-fulfilling prophesy.

At Propertyfinder we want to see a stable market without dramatic rises or falls in prices. We also like to hear everyone's views on the market and on the house buying and selling process so we look forward to further comments.

Whilst it is interesting to note the speculations and predictions of the market future, has anyone got a finger on the day to day pulse of the market. How for instance, do the numbers of sales compare with this time last year?. Is there a comparable average marker, for the length of time between sales instructions being issued and sales completion. Surely these are the markers which we frustrated sellers would gain most confidence from.