UK facing double dip threat, warns Woodford

Let's re-cap on what's recently happened:

We saw prices peak in late 2007. The financial crisis struck.
Prices then fell all through 2008, not reaching bottom until the spring of 2009.
They, then started rising again in spring 2009 and have risen unabated until now, almost returning to their pre- 2007 peaks! Odd, considering the problems looming in the economy!

To read more into this, please check the demand (or the completions) curve for this time. I think you will find demand was falling off, even though prices were evidently still rising. Another very odd occurrence.

This happened despite clear signs to everyone that the economy had suffered a monumental collapse?

Is it any wonder that house prices are now set to fall again? No. The only question unanswered is, how far will they fall?

We are, of course, talking here of run of the mill (average) houses - not the sort of places that super-rich foreign investors are likely to want to buy.
We are also talking about National trends, not isolated pockets of activity in say the South East and London area.

Specific examples or particular experiences, though helpful, are not very useful evidence. Individual experiences are merely isolated cases.

I think Tom Goodley of Strutt and Parker, Norwich, has a point by allegedly saying "There appear to be a lot of overpriced houses on the market, and a shortage of buyers."

The obvious answer is everything now needs to be re-priced in line with true market expectations, if sales are to pick up again.
The question is, can all the agents come to terms with this and deal with it? Based upon their track record so far, I rather doubt it.

• 15 September 2010 12:50 PM

Increased unemployment and interest rates will dent your theory Land Office and this is what looks to be on the cards over the next 3 years at least. Remember the 1990's! London has benefitted from the low £ bringing overseas buyers into the market to pay over the odds for property, low stock levels have kept prices high. Add to this the fact that many home owners cannot sell as they are fortunate to be on trackers and paying a fraction of what they would have been paying 2-3 years ago, or if they were to take on a new mortgage. New lending has been stifled and charges for setting up a mortgage tripled. This has all combined to present a very false picture in the housing market. One thing is for sure, as soon as one of the above changes - the market will also change with it and the future isnt looking rosy for property for 2011-2015.

• 15 September 2010 11:38 AM

The housing market defies economic theory because the suppliers of property to the market simply refuse to sell when prices drop too low.
This makes a 30% drop very unlikely, which is why the market volume drops so much when prices do fall.
The reduction in supply, when prices fall, mean that demand begins to outstrip supply even more than usual and prices either level out or rise again.
Many of the 'outspoken' economists overlook the fact that the buyers in the housing market as also often the suppliers, which makes it more challenging to apply simple economic models. That's why we get so many false predictions in the media.
Do you agree? Does this make sense to you? What does everyone else think? Do you thin a 30% drop is ever going to happen while the supply of homes is so far behind the demand?

• 15 September 2010 09:57 AM