Ross Clark

Are house prices about to fall?

  • From Spectator Life

A pattern seems to have emerged in the latter stages of the Covid crisis: Keir Starmer gets wind of discussions within government of possible new lockdown restrictions and calls for them to be implemented immediately – just to make it look as if he is ahead of the curve and the government behind it. We should take seriously, then, Sir Keir’s call for the housing market to be closed down for the duration of the lockdown. At present, in contrast to the first lockdown, it is still permissible for property viewings to take place, and thus for homes to be bought and sold.

Yet as increasing numbers of buyers are already finding, for them the housing market has already closed down. According to Rightmove, 28 per cent of sales collapsed in December, compared with just 17 per cent in July. One of the big sticking points, it seems, is the mortgage market. Buyers assume that they can afford a property, perhaps based on discussions they had with a mortgage-lender months ago, but when it comes to trying to complete a purchase they find that the lender has changed its mind: they are now less optimistic about buyers’ ability to maintain their income.

The experience of 1988 is not promising. The housing market peaked in a great flurry of activity, before the market slumped into a three year decline.

The apparent robust health of the property market has been one of the enduring mysteries of the Covid crisis. When the property market was suspended last March many assumed that when it re-opened it would be with prices 10 to 20 per cent below where they had stood in March. Instead, the market reopened as if nothing had happened, and the year ended with prices up seven per cent on where they had been last January.

Of course, plenty had happened in the interim.

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