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Wednesday, November 22, 2006

House Price Slow Down

It seems that finally the long bull run of house prices in the UK may be coming to an end. That at least is the view of a former government economic adviser, David Miles, the Morgan Stanley chief UK economist.

UK house prices have risen more than twice as much as general inflation in the past 10 years.

Mr Miles predicts that the rate of house price inflation will slow down. However, he is cautious about predicting exactly when the prices may fall.


"A substantial fall in real house prices is likely at some point in the relatively near future, though it could yet be one or two years away."

Mr Miles issued his warning in a report, entitled "UK Housing: How did we get here".

PricewaterhouseCoopers have also predicted that there is a one-in-three chance of UK house prices falling by 2010.

That being said, past reports of the death of the UK house market have been premature. This year prices have started to accelerate again, and are now running about 8% higher than a year ago.

The main driver behind the price rise is speculation that they will continue to rise, in other words it has become self fulfilling prophecy.

Therefore once the confidence in the system is knocked, we may expect a price slow down or even a collapse.

However, it is unclear as to when this will happen. Prospective home owners should take note in the old saying, "timing is everything".

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