Sharing the pain
The volatility of our housing market is almost certainly not going to go away. Indeed, the aftermath of the financial crisis is going to bring greater rather than less volatility because new supply will be more constrained and it will take a long time for consumers to regain confidence.
In this environment it is important to develop solutions which can be more robust in the face of these uncertainties. In particular that means reducing outgoings in the early years and sharing the risks of house-price volatility with government or other institutions.
The biggest issues are how to reduce the risk to the individual from house-price volatility, and how to reduce the specific risks associated with buying a large, indivisible housing asset – risks concerning location, neighbours and the particularities of the dwelling.