Despite a set back in prices since late 2007, UK house prices have not fallen by as much as might be expected. For example, UK house prices have not fallen by a similar amount to US or Spain.
House Prices Since 1960
Real and Nominal House Prices
Real house prices take into account the effect of inflation. Despite two house price crashes in 1991 and 2008, housing remains a good investment offering a good return in real terms. (In addition to capital gains also income from renting)
real house prices – series 2 (Red)
Nominal house prices – series 1 (blue)
Annual Percentage Change in House Prices
Many factors are pushing house prices down:
1. House prices fell for four years during last slump
2. Economic Recession The recession continues to worsen threatening more unemployment and therefore more home repossessions.
3. Lack of Funds for Mortgages. The Banking Sector is still fragile after more bad debts exposed from credit crunch. Lending conditions likely to remain tight.
4. House prices still expensive. House price to earnings still higher than long term averages
5. Lack of Confidence as falling prices and recession put people off.
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The flow of funds from the far east to western banks halted some time ago, and as Japan and China seek to preserve cash to deal with their own crises, the tap isn’t going to turn back on any time soon. Even when credit conditions do start to ease, buyers are still reluctant to accept that today’s prices are the trough following years of above inflation growth. Only time will tell where the bottom will be.
Since house prices were already touching ceiling till last year.. isnt this a good news, at least for common people?
Look at Japan…their real estate took years to bottom.
Rents drive real estate prices. Supply/demand drive rents. Demand is driven by incomes. Supply is driven by incentives to build (usually high rents and low costs).
Oh well, anyone looking for a $6,000 3-bdrm in Detroit?
http://www.planbeconomics.com/2009/03/11/looking-for-a-6000-3-bdrm-house/
the last year has been good for first time buyers but they better get a move on, otherwise prices will start to rise soon.