Don’t bet the house on a property plunge

keith

Unless of course, the Bank of England is eventually forced to put up interest rates because the bond vigilantes demand higher yields. Or because inflation, despite the anaemic growth, rises faster than was previously assumed. It's called the law of unexpected consequences. As for future housing booms, I wouldn't necessarily count on one. It may just be that next time it will be different (in view of new FSA powers to limit credit, the end of liar loans, the end of interest only mortgages, the end of cheap credit, the freeze on wages, the end of western financial pre-eminence, the new looming demographics which will increase debt further). Housing was one of the best investments of the past 20 years, but may turn out to be the worst one of the next 50 years. Trouble is, as the article rightly points out, politicians will do everything to disguise the falls. Still, I've no doubt that some future, unexpected crisis will hasten the inevitable falls. Sucker beware!

Bertha Venation

Just one thing wrong with your prediction. The long term trend is transfer of wealth from West to East. Forty years of unsustainable health & welfare spending plus easily available credit for pointless, hedonistic consumerism have indebted Western economies for a generation (at least), impoverishing their populations with the only remedy, money printing & inflation. No, there won't be another housing boom for decades, don't hold your breath.

JD

Youi're confusing price inflation with wage inflation.

In today's globalised economy we have the former, but we don't have he latter - quite the reverse in fact.

In 1974, 17% inflation meant 17% wage increases. That would no longer happen - it can't happen in a globalised economy.

When it comes to inflation, be careful what you wish for. Because price inflation without wage inflation means disaster, particularly in our over-indebted households.

Quite simply, 'letting inflation rip' would destroy us. The last thing we'd be concerned about would be house prices.

Forester

Buyer beware!

If prices are already falling as the article concedes, who will jump in now when they can wait 6 or 12 months and buy cheaper? Why catch a falling knife?

I'm afraid there no such thing as a 'forced' buyer, but plenty of reasons to need to sell (death, divorce, debt), the first to get out of a falling market gets out with the best price.
With this dynamic, this one could now fall hard and fast, just look at the USA, Ireland & Spain.

Tony Marshall

Easy credit has dried up, so house prices have got to fall in relation to wages, so that ordinary people can afford to start buying again, based on sensible lending criteria. Inflation is due to the falling pound and international commodity (eg food..) prices rising, not UK wage levels.

As the price of food rises, as VAT rises, as government cuts start to bite, the spending power of the ordinary house buyer will fall, not rise. They can print all the money they like, but all that will happen is that sterling will fall further and we shall have to pay more for our imports. If they choose that route, the end game will be a the unavoidable need to raise interest rates, not to stifle inflation, but to prevent a complete collapse of sterling.

Then house prices have only one way to go…

Specky

Personally, I think we need two housing markets. One for the author and his speculator chums to make (or lose) more than they would from the Suckers account at the Northern Rock and the other for all us poor Joe's who just want somewhere to live where you can choose the wallpaper, have a pet, and don't have to worry about being asked to leave with two months notice.

Gary Chadwick

This is a very interesting sceniro the auther has it on the button with his pedictions and I predicted the first so called crash.The problem with the impending correction is the level of debt that the consumer has found themselfs due to the raiding of that so called pot of gold called a home is now going to de rail future prosperity of the masses but in a way very paradoxical in the way that it will help the younger generation finally get a home and not a purse to be raided at whim lets hope the young ones learn from the excesses that the older generation have consumed themslfs in and hopefully we will not have to discuss how much their home has risen in 24 hours