And so the madness continues

Is anyone else getting fed up of sensationalist media coverage of the property market? Well I am. I’m not disputing that house prices are falling. Of course they are. And yes, some home owners have been hurt by falling prices. But today I have decided to make a few simple points that just don’t seem to be getting through to the mass media headlines.

If you take the latest Halifax figures at face value, average house prices in July 2008 were 8.8 per cent down on the previous year. A simple Google search of the resulting headline reveals 224 articles, the vast majority of which are full of doom and gloom.

Now, time for a little perspective. A £200k house last July is now selling for £182,400. Does that really justify the headlines that read “plummeting house prices”? It might in the short term. If you were only planning on owning the property for a year a so, a near £20k fall in the value of your asset isn’t great. But in reality, most buyers are investing for the long-haul. So if the house was now only worth £80k, that would be a plummet. That would be a crash. That would be a property crisis.

Falling house prices haven’t been catastrophic for a whole throng of current home owners, or first time buyers. In fact, both groups have a lot to gain. Current owners, specifically those looking to upsize, are actually better off in some cases because falling house prices mean that they can actually save money by moving this year instead of last year.  For instance basic data from Findaproperty.com put the average cost of a flat in a Swansea suburb at £126,071 in 2007 and a terrace property at £167,267. Now these figures don’t distinguish property by size or quality but they’re still useful for the sake of demonstration.

If you wanted to upsize from the flat to the terrace last year, the move would have cost you £41,196. But if you did it this year when the flat is now worth £94,860 and the terrace £114,237, the move would only cost £19,377 – a healthy saving of just over £20k. Now you don’t read about this in the papers much do you?