Thursday, November 23, 2006

Adopt the position?

Why have house prices soared so high and are they set to crash?

Apparently house prices could well fall at some point over the next couple of years. Now regular MoneyWeek readers will know that we've been expecting some sort of collapse for quite a while - but it's not just us who are saying it this time. No lesser authority than David Miles, Morgan Stanley's chief UK economist and former adviser to the Treasury, has reported that "a sharp fall in real house prices is likely at some point in the relatively near future." So why does he believe this? Miles believes that as much as half of the growth in house prices since 1996 (up about 187%, according to figures from Halifax) has been driven by speculation, with only half down to fundamentals, such as the supply and demand issues that property bulls keep citing. He's not sure of exactly when the slump will come, but seems to think it'll be pretty soon - "it could yet be one or two years away".

Posted by converted lurker @ 11:26 AM (1446 views)
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2 thoughts on “Adopt the position?

  • House prices won’t crash next year due to one single reason:

    Romania and Bulgaria are joining the European Union. If half a million come here next year, as expected, then the house price boom will continue for another few years.

    Articles predicting a house price crash in the coming year always seem to occur in the run up to Christmas and are always gone in the new year.

    Also if it looks like a crash will happen the Bank of England will slash interest rates to keep the “miracle” boom going.

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  • What does “real houseprices” mean. Does this mean the actual figure may not drop but in comparison to inflation it will?

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