With the economy in decline, public sector cuts yet to even bark let alone bite and banks more intent on swapping Gilts with the government than lending one would be forgiven for thinking house prices will go through the floor next year.
Recent Hometrack data puts house prices dropping at 0.4% month on month and 1.6% year on year. Although this is the result of six months of consecutive house price falls it still does not show anything other than an overall small price correction. But of course the real brown stuff is yet to hit the fan. Brown stuff like the above mentioned public sector cuts, lack of mortgages and of course tax rises.
But anyone who thinks that we will see huge percentages lopped off of the prices of houses in the short order of a few months is going to be disappointed. Because this is Britain where, even in the face of impending economic hardship, the sweet security of owning property overpowers all other sentiment.
Be in no doubt there are tens, nay hundreds of thousands of budding home owners out there champing at the bit to get on the home ownership ladder. For every notch down in prices there are people for whom the dream becomes affordable and in they will leap. Just look a the recent past. Logic says do not try to catch that falling knife, but the heart says go for the dream now and worry later.
Then there will be investors who look around at the returns available elsewhere and decide that long term investment in property now is a good thing for them. You may be in disagreement but it is their money and some will buy.
Of course then comes the realisation that every time a house is sold at about the current asking price it just helps to keep the expectations of other sellers in relative dreamland, so they hang on in hope this keeping prices high.
In the past market forces have helped to drive prices down. Now we have banks desperately trying to avoid writing down their asset (mortgage) valuations any further and a government terrified of seeing repossessions increasing. So even if banks repossess they are unlikely to offload onto the open market and the government will be arm-twisting the banks to try and prevent repossessions in the first place.
House prices will continue to stagnate until such times as people have the wherewithal to buy in numbers again. That is going to take many years, maybe more than a decade. In the meantime many people will be left to the vagaries of the rental market and will never owe their own houses. In fact, unless we have a significant change in government's, banks' and peoples' view of housing in the UK we may have witnessed peak home occupier / ownership.