Whether house prices are increasing too rapidly or falling, there are always calls for the Government to do something. If they are going up to fast, house builders and The Guardian call for more homes to be built. If they are falling rapidly then the daily mail calls for tax breaks for “hard pressed homeowners.” We never hear calls from the Guardian to knock down empty homes of house prices are falling or from The Mail to provide tax breaks for builders to build more of they are rising. Odd that. This is one asset class which is – for most folks – not actually an investment but where folks from across the political spectrum constantly demand that the free market be distorted in order to make it a risk free investment. But of course it is not risk free. And I fear that in real, and perhaps in nominal, terms UK house prices must fall and by quite a material degree.
For the fact is that the increase in house prices during the past ten years has been unsustainable. According to the National Housing Federation, the average house price has increased from £121,769 in 2001 to £236,518 last year a 94% increase. During that time the average salary has increased from £16,557 to £21,330 – a gain of just 29%. Just looking at those numbers something is not quite right.Read the full article on ShareCrazy.com | Comments