Monday, March 26, 2012

House prices continue to be unaffordable albeit at a slower rate.

House prices falling in real terms for another three years

The Office for Budget Responsibility released its data post-Budget, forecasting that house prices are set to dip 0.4% this year – a little greater than the 0.2% drop the OBR forecast last November. Next year, it expects house prices to go up by 0.1%, and by 2.5% in 2014. However, because inflation forecasts are set to be 2.3% next year and 2.5% the year after, in real terms house prices will fall. House price inflation is forecast to overtake general inflation in 2015, when house prices are forecast to grow 4.5% and general inflation is predicted to be 3.6%.

Posted by sibley's b'stard child @ 11:22 AM (1518 views)
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5 thoughts on “House prices continue to be unaffordable albeit at a slower rate.

  • mark wadsworth says:

    So far, the Blue-Yellow Wing of the Home-Owner-Ist Party has proved itself as committed to the task of keeping house prices high as the Red Wing was, and being fair, they have both been very successful in achieving this seemingly impossible feat.

    I’m amazed that a government which has absolutely no money and is deep in defict spending can find enough ammo to do this (perhaps that’s where the deficit spending is disappearing to? It goes into propping up earnings of those “on the ladder” and is taken away from those who aren’t?)

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  • I think most of the support is monetary policy based, or via requests with banks to be lenient or policies that help housebuilders, none of which would affect any deficit. Not that I think a sovereign govt ever doesn’t have money, but that’s another story.

    As you say, support of prices seems to be non-partisan and also committed to at all cost by both sides. As such I’m coming to the conclusion we aren’t going to see the large nominal falls I thought we would. Whilst I’m still bearish it’s only in real terms, which unfortunately knackers my sell to rent strategy.

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  • I don’t believe the OBR are actually in control of our economy.

    Is that a big black swan I can see in the distance?

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  • More voodoo economics from the hacks. The only thing going down in “real terms” is wages.

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  • I agree with Terry. It’s blatantly obvious that they’ve supported house prices by devaluing the currency. The politicians are kicking themselves because they can’t take credit for it – the BoE is supposed to be independent, after all.

    Back to the article: “real terms” prices are meaningless. Our savings aren’t index-linked; our wages aren’t index-linked. Even the inflation measure itself is at the mercy of government, whose interests aren’t aligned with those of savers. A large part of the reason why property is generally such a good investment is that over the long-term it rises neatly with inflation. Let’s banish all talk of “real” house prices, and focus on the actual (nominal) price.

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