Housing has further to fall
A few years ago almost no one thought it was possible for British house prices to fall. Last year, 16% thought they might. Now, according to Findaproperty.com, that number has risen to 42%. A mere 11% now expect prices to rise from here.
You might wonder how the latter group could think this, given the lack of mortgage finance, high unemployment and falling real incomes. But the last few weeks have given them some supporting arguments. The first comes from the Halifax, whose research says it is now cheaper to buy a house than to rent one (£608 a month versus £706 for a three-bedroom house). The second comes in the form of a new wave of buy-to-let mortgages and suggestions that those who buy smartly can get yields of 6%-7% on investment properties.
But these are red herrings. The Halifax index is pretty comprehensive. It takes into account that owning a house isn’t just about mortgage payments. So it includes calculations that reflect the lost interest on the cash you use to pay your deposit, maintenance costs, insurance and so on. But what it can’t do is factor in the potential for change in the main thing that is making buying look cheaper than renting for now – low interest rates.
• Read the full editor’s letter here: Housing has further to fall