Metro Front Page

[RufflesTheGuineaPig]

Ah...depends on whether you believe wages will in fact rise. I can't see wage inflation to mask nominal price falls for a good few years.

Wages are falling.

[MinceBalls]

I'm not suggesting they should prop up house prices, I'm just wondering aloud whether they'll be prepared to see them fall substantially.

I can't help recalling what John Redwood said in his blog in early April:

"I went on from the supermarket to talk to a group of senior managers from a wide range of businesses. They too raised the house price issue. One of them recommended creating the conditions for a further subtsantial house price fall because he was worried about affordability. The others, all home owners, thought this a dreadful idea. They asked what the political parties thought. I said the parties thought there were a lot of home owners out there!"

The problem is that we are stuck... prices are too high so people cannot get the mortgages to fund purchases... and yet people are up to their eye-balls in debt so cannot (will not yet) see their property come down in value. We've been stuck in this rut for a year now but it is not a long term solution beause as started above the market cannot become healthy until people can enter the market... and it doesn't look like banks will be lending new entrants anywhere near what they need to borrow at current levels.

My guess is that if the government could get 20% off the market in the next 12-24 months they wouldn't be too upset... socially it might be a vote winner in 5 years time.

I just don't know though, GB invented all sorts of cr@ppy stuff just to prevent this from happening so there is clearly a massive political interest to keep house prices high (pressure being from the current home owners who also happen to run the country)

[winkie]

The new prime minister is renting out his house, so he must not think that prices will fall - does he know something we don't or is he just waiting for the market to recover.

He is renting out his home....that one day he might want to return to live in, what is wrong with that.

[campervanman]

Thing is, are they willing to risk losing the votes of those homeowners (with mortgages paid off or still paying them) who find in 2015 that their house is not "worth" what it was when the coalition took power? Will they really bite that particular bullet?

Contrary to accepted HPC wisdom, I believe that most homeowners would actually welcome lower house prices. People are now realising that trading up is more expensive with higher prices and that mobility becomes extremely difficult if prices are out of reach at the bottom end. Of course there will be some (downsizers and post 2004 buyers) who would want high prices but on balance I suspect the government have worked out that this time around, falling house prices may be a vote winner not a vote loser. The volume of negative house price news coming through also leads me to believe that they are making a big effort to get the message home that house prices are too high.