We'll have another housing boom

by Ed Bowsher on 20 May 2009  |  4 comments
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Eventually house prices will soar again.

One of the best things about working at lovemoney.com is that we have an informed audience with strong views. I enjoy debating financial issues with our readers and I look forward to many more such debates in the future.

The issue that normally generates the most passion is property - especially property prices. As a writer, you know that whatever you say about property prices, some people will disagree.

We saw another example of that yesterday with John Fitzsimons' article:  Finally, good news about house prices!  John highlighted a couple of stats which suggest the housing market may be about to turn. He then argued that these numbers were probably just blips. In other words, property prices still have further to fall. I'm in complete agreement with John on this.

The bit that proved controversial was the headline - check out the comments on the bottom of the article. Several readers strongly believe that rising house prices are a bad thing, not a positive.

So having read the comments, I can't resist sticking my oar in....

Let's not forget: some people have been badly hit by rising house prices. Especially those who are now in negative equity. It's easy to say that people were foolish to buy property at the top of the market in 2007 but the average Brit's desire to get on the housing ladder is very strong, and I wouldn't wish negative equity on anyone.

It's hard for people in negative equity to move home, and negative equity also means that you can end up stuck on the lender's SVR. Then you can't benefit from any special mortgage deals....

Unfashionably, I also have some sympathy for over-extended buy-to-let landlords. I've made some terrible stock market investments in my time, so I can't feel superior to people who got carried away and borrowed too much money to buy too many properties.

Culture

That said, I do think it would be good if UK property prices fell some more from here. The obsession with property is now deeply ingrained in the UK psyche and that's not a good thing. People have been able to make 'easy' money from property and that's meant talented people haven't been focusing on opportunities that can create real long-term value for our economy.

Rising property prices have also discouraged many Brits from saving. Saving is important - you can't have investment if no one is willing to save.

I hope that one day we can get to a stage where our economy is less slanted towards financial services and property. Hopefully, we can achieve good growth in areas such as media, manufacturing, technology, and tourism. Then when we have a better balanced economy, it would be good to see property prices rising at a nice, gentle rate. Property speculators won't be able to make fortunes but we will have stability.

Do  I think that will ever happen?

Probably not. I suspect property prices have further to fall in the short term, and then prices might move sideways for a while. Or rise at a slow rate. But eventually, we'll have another big British housing boom. We love property too much....