Wed 4th Jun, 2008
Are house prices on their way to a crash?
Almost everywhere you go these days you can hear people obsessing over the same big question, which way are house prices going to go?
It should not come as such a big surprise however that almost everyone is so concerned over this one question. First of all with the massive year on year growth that we have seen for the past decade many people were simply assuming that there was no safer investment than in property. At the same time many people genuinely thought that property investment would be a great cushion for retirement. The events of the past few months have really shaken peoples’ confidence in the property market, and have now got everyone asking if property investment is really the way forward.
So are Britons right to be so nervous about the property market now? Judging by what many experts are saying, the answer would seem to be yes. First of all there was the Nationwide Building Society forecasts that house price inflation was going to fall from a current level of 10% all the way down to 0%. That prediction was on the more optimistic side of the scale with other institutions predicting that in one year’s time the price of the average house would actually be 3% lower than it is today and dropping by another 3% in 2009.
However despite these predictions we are probably far more likely to have a drawn out decline in house prices rather than a crash. The country is no doubt in the grip of the credit crunch, but the type of recession seen in the early 90’s is unlikely, according to experts.
Whilst borrowing in the form of home loans and personal credit has become much harder, employment levels have not yet dipped. This means that would-be house buyers and those looking to finance cars or holidays may have trouble getting the cheap loans on offer a few years ago, credit is still available, unlike 15 years ago.