JohnRuddy - I once bought a flat for £56k in end of 1991, where a year previous neighbours with same were buying for £79k. They dropped like a stone. But remember, you can buy incredible cheap by auction, where people, and building societies with repossessions, want to sell quick.

Anyone who buys through an estate agent these days is an idiot, as far as I am concerned.

@Mr Divine: Indeed, though some lack of consistency on Dan's part. I think you sent half a dozen comments, I wasnt allowed to reply once!
I use a similar system myself, 'tis the weather for it...

Its clear that prices are going to fall and fall a lot. They are simply overvalued and their isn't the finance to prop the overvalued prices any more.

Even London prices are going to fall, central London property price rises have been caused by mass money laundering and foreign currency flight. It is just one giant bubble on another bubble.

I think most people ask the wrong question. The question is not whether the price of house will go up or low. The question is should one buy a house. The answer to that depends on
a) If you want to settle down at a particular location and if yes b) how much mortage that you need to take.

I would say keep on renting until all your savings is atleast 70 pc of house value that you want to buy.

Being a conservative, I do not like debt. Not at individual level nor at government level.

Offcourse some greedy people would buy a house taking great risks and then blame government for not formulating policies according to their needs.

Property is like Gold. It is an asset. When the currency devalue as is happening with Sterling and dollar, in slightly longer term it will appreciate.

That the house price would appreciate in Long run should not mean we should start buying house. Remember we are all dead in long run. Because before the long has run, we need to pay cash to creditors.

I thought I should clear up some of the irrational or economically literate comments that always follow any article on house prices.
First, Dave Amos:
Gov / Banks) created the over valuation in the first place, then i am certain they will engineer a soft landing, reason - simple - they is no cash anywhere in the economy to pay for all the defaulters should the banks call in the loans.
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if there is no cash around, then prices can only fall. How can near record prices be sustained when there is no cash around? They can't. If you want to create artificial wealth (wealth without actual wealth creation, we could adopt blades of grass as our national currency, go out and mow the lawn and pocket it all).
Properties will come onto the market thru distressed or other forced sales. Without higher interest rates, this could be a slow process.
Mr Amos again
inflation is not consumer driven any way, it is all external, so upping rates will have zero effect on inflation:
We are a globalised economy so this is not true. Low rates create a low exchange rate for the pound, which makes imports more expensive, obviously driving up inflation. Higher interest rates will lead to lower prices of imports as well as of domestic goods and services.
Mr Amos' third is the worst
the main problem is that the public has no idea how dire the state of the national finances are, the current Gov deserve some credit for creating a fairly stable position, the previous lot should be charged with negligence, or more likely stupidity?
Private sector debt at 250% of GDP, is far worse than public sector debt in Britain. Consumer debt is over 100% of GDP for the time since the start of the industrial revolution. You propose the most guilty (banks and mortgage holders) be bailed out, and the lesser criminals, govt (58%) be put in jail; while the least of all guilty, those without an unaffordable mortgage pay for the crimes of others (the indebted) by getting 1% on their savings, have their taxes go to bankers and the indebted, and keep affordable out of their reach. This is a recipe designed by the gutless for the gutless, and it would make you the criminal.

Ms swatantra nandanwar makes the classic mistake of citing supply and demand.
She says...
The only way is up ... because its a question of supply and demand. There simply isn't enough suitable property/houses around.
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The classic misunderstanding of the term, supply and demand.
Demand is not how many people want a house. Demand is not how much money people are willing to pay for an item (house in this case). Demand is a map of volumes and prices. It expresses how much money will be spent on an item.

Demand for housing is in freefall because there is no longer lots of cash. This situation is not going to change because the national and international banking system is still technically insolvent, hence the govt guarantees. There is no cash to pay for the massively priced housing in Britain.

economics 101: definition of demand
Demand is the amount of a product that consumers are willing and ABLE to pay for at a given price.
Therefore, the demand for £200K houses is the amount of them that people are willing and able to pay for. As there is less money, the amount people are able to pay for has fallen. ergo, demand for £200k, and also for £100K, £300K and £400K houses is falling. Housing demand IS Falling!!!!

The sense of entitlement in UK is deeply worrying. People are simply sleepwalking into disaster.

I mean 'House Ownership'

elrob
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Demand is function of necessecity. People will rent in. If they cannot afford 3 bedrooms they will cram in 1 bedroom.

But there can be migration when rentals fall below a certain levels because lot of people from other parts of the world will be able to risk their money and try and see whats available in UK.

RK
Demand is a function of money. Requirement is a function of necessity. This is economics, you are talking of sociology.

elrob
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Leave academics. In real world, you do not worry about physics and chemistry of cofee before drinking (and liking) it.

If everything can be done in classroom, USSR would still be a superpower.

elrob
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then let's value housing in a currency that cannot be cheated, gold. Prices of UK housing is down by almost 70% in golden in three and a half years.

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You are getting there. Thanks.

....the nasty Tory party were showing their true colours...

Do they have a choice? I think tories are too soft. The need is to give our people a rude awakening about the world that has changed dramatically in past 10 years.

@David Blanchflower

... the drag on UK disposable incomes before housing cost is going to pressure on house prices.

There is other data to corroborate the 15%-20% overvalue and explain the underlying causes.

The last government borrowed £350Bn before 2008 and injecting it into the economy caused an asset price bubble.

To chart 2, add the discounted impact of fiscal policy on personal incomes before housing cost normalised for the total value of private housing stock. I see a current overvalue would be nearer to 40%.

40% is more realistic than the 20% given the accelerated errosion of the UK's industrial base from 2000. It is being amplified by frictional unemployment during reallocation of resources from the public to private sector.

Is it fair to define New Labouromics: fiscal policy for political advantage of a small elite? Can New New Labour create a better process for policy development focused on the national interest?

I was flicking through some old party snaps and found this visual metaphor for 'equality of opportunity for all our kids':
http://www.dailymail.co.uk/news/article-1286627/Ed-Balls-forgets-Tory-Ox...

the only reason we didn't have a house price slump back in 2008 was due to near zero interest rates, printing money as well increases in debt. this has made the underlying problems for western economies worse. the chickens will come home to roost and it won't take long. when the correction will come it will be massive.

Looks like ongoing stagnation and bouncy (i.e. up AND down) fluctuation for the next few years..... in NOMINAL terms for house prices.

In the meanwhile, the whole game has been rigged to ensure that EVERYTHING ELSE will catch up via inflation.

Eventually that should include wages too.

It's a rotten game, no question.

And the societal consequences EITHER ignored and uncared for by the powers that be, OR the importance of dividing the haves and have-nots is too important to the haves to reverse. :-/

Mitchy: at least we can hide in this house here and old Blancy wont be any the wiser. He's more interested in the cost of the house as opposed to what is going on in his front living room when he's away in Florida with his IMF friends. Dan is like a little bulldog on his blog sniffing out all the weed and throwing it onto a big bonfire.

Have you brought the papers?

@Luddite

Spot on.Low interest rates and people thinking they are going to get top dollar for their house.That's what's keeping the prices up.This can't go on forever
.

Typo - I meant 'less well-off' in my first para. Although maybe that's some kind of Freudian slip going on :-)

Mike555
The boom under Labour was a disaster for the medium and low paid, I think it was Labours greatest domestic failure, more than wiping out the good done in other areas.
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absolutely spot on.
This is exactly what Ed Miliband should be getting a grip of, and Ed Balls, too. I had some hope for Ed when he was elected, but less for Balls. "Naive on markets" ... talk of the squeezed middle and I recall Miliband mentioning that social democracy needs to convince people by changing from a philosophy that allows capitalism, and then bails out the losers.

Soc Dem must be about allowing low and mid income earners to earn their own wealth, and get a fair slice of the cake.

But New Labour was a disaster, as you say, because of housing. It got every call wrong: Deregulation of banking, selling council houses, allowing the BoE to cut rates during a bubble (Aug 2005 was THE worst call of the MPC), even giving mon policy to the BoE has turned sour.

The future must be. Lower house prices. Grasp this nettle or all else is worthless!

Make 15% legal min deposit. Raise rates if housing prices rise by 6% annually or more. Introduce living wage. Cut standard rate income tax, and make it transparent: 20% inc tax and 12% NI is 32% inc tax. This will show that higher rate payer hardly pay more than the lower paid. It could be paid for by a land value tax quite easily and sort out the structural deficit.

Have people earn their way to wealth/comfort rather than expecting housing bubbles to sort them out. The latter's dishonest and won't work. The high h price policy bust the banks, impoverished millions, and may have damaged Labour's chances in the near future, and for what?

The people you were supposed to represent cannot afford a home for the first time in 40-50 years.
Low house prices mean. People can plan families with confidence, and have money left over to save.

It cannot be underestimated the disaster that New Labour was, and that's from a Labour supporter.

mitchy: Quiet riot's girl's house is a good place for a sess. Lets celebrate the royal wedding. I suppose I should ask her if it's OK to lit up at her place. Or we could just squat.

http://quietgirlriot.wordpress.com/

You have to remember that the housing market varies enormously by region. I recently bought a house in Surrey and paid exactly twice what it last sold for in 1998.
Not exactly a massive boom here. In many other parts of the country (like the West Country and parts of Wales, the North and the Midlands) house prices have increased by a factor of 5 (or more) in that period.
Those areas will certainly fall and, looking at house prices still being asked in those areas, a lot of the South East (with much higher employement and with better salaries) looks relatively cheap.

The UK median Household Income is one way of considering affordability.

The last time house prices followed their long term inflationary affordability as a proportion of household income was the mid 1990's.

It is clear that if prices fall to the same level of affordability relative to median household income earnings and interest rates, as they did in the mid-1990s, we are still looking at a 50% + fall, from 2007 peak prices.

Home ownership has remained pretty level since 1990.

An important difference between this bubble and the late-1980s bubble is that this time there are a lot more buy-to-let speculators. These people are highly leveraged (their debts are high relative to their assets) so small changes in asset prices SHOULD make a big change to their situation. As it becomes more difficult to borrow money, many of these people SHOULD find will find that they cannot refinance at affordable rates when their 'teaser' rates come to an end. The long term average Base rate is at 5%. When IR rise again these BTL Speculators must sell their properties or the bank will repossess.

But even then, taxpayer owned banks, do not have to sell repossessions.

The government complains about the “lack of housing” as a cause of the problem, for FTB'ers, yet they sit back and let the banks hold large amounts of the potential housing stock.

It should be illegal for foreclosed housing to have a reserve price.

There is no truer valuation, of what a property is actually worth, than what someone is prepared to pay for it at auction.

Like Millions we have been forced to waste tens upon tens of thousands in rent, and put our lives on hold. All to support a corrupt banking/monetary system which allows the banks to simply create money [debt] out of thin air. [M4 Money supply] The Banks should be likened to being an occupying force.

The UK is under occupation, from an enemy which attacks our liberty, democracy, and human rights, and our elected officials, are like those officials in Vichy France who tried turning a blind eye to the Nazi's. [Gordon Brown and New Labour]

Why bother invading a country with arms, when you can enslave the population using stealth, without the bloodshed?

The banks own us from cradle to grave. They know it and engineer it to be that way. The last thing they want is people being self sufficient and not having to borrow from them.

The UK is not a Democracy. We are a Plutocracy, or the Corporateocracy which New Labour set out to create.

Expect 60% falls from Peak.