The future of house prices

With UK house prices falling at a rapid rate, it's understandable that many people have been holding off buying. What many people want to know is what does the future hold for house prices?

The various house price surveys that are carried out by the likes of Nationwide and Halifax give some indications, although it is worth noting that the picture frequently changes and that the experts often seem unable to agree on very much.

An article in the Daily Mail talks about house prices falling by 35% from their peak (achieved in 2007). They suggest that the average house price could fall to £120,000 by the Autumn of 2009.

Will such predictions prove to be true? The truth is that there is little concensus when it comes to house prices and that you need to be aware that many of the independent figures are nothing of the sort.

Estate agents, mortgage lenders and even newspapers often have their own reasons for wanting to portray the situation as being more positive or more negative than it really is.

Effects of the credit crunch

Thrown into this mixture is the credit crunch, which has been hitting the headlines in the UK and all over the world. The fact that banks and financial institutions have suddenly become unwilling to lend as easily as they were has added to the general slowdown in the housing market.

Are we likely to see large falls going forward, or should we expect the situation to stabilise? Finding answers is not easy.

Some analysts point out that the property market has in the past behaved in much the same fashion as the stock market. Just as is the case with stocks and shares, property prices go down as well as up. Over time, property prices have generally gone in an upward trend.

The problem is picking out where we are within a cycle and trying to predict what the future holds.

One factor to bear in mind is that headline figures often hide the reality on the ground. The fact that average house prices are falling at a certain rate nationwide doesn't mean that there will necessarily be the same falls in the town, village or city where you live.

Individual regions will see their prices altered depending upon local factors, as well as those that alter the economy as a whole.

This makes it difficult for analysts to predict exactly what will happen in the area where you live. You may be better to keep an eye on local house prices and to talk with local estate agents and friends. This may give you a better idea of what is going on locally than anything that you read in the papers.

Filed: 23 October 2008