The house price falls for 2011 have only just begun

Adjusted for inflation, Britain's house prices are now 20% down on their 2007 peak. This may tempt you to think the slump is over. But it's not. The only direction for house prices is down, down, down.

So much for the great house price recovery. Nationwide numbers just out tell us that prices fell another tiny bit in December. That means they ended 2010 down just over 1%, and that they are still 13% off their 2007 highs. Add in inflation and it is more like 20%.

You could say that this very big number suggests the fall is all but over. I suspect it is not. The house-price-to-income multiple is still way above its historical averages: it's long-run level is somewhere between three and four times and it is now something between five and seven times depending on what data you use. That is slowly changing, for the simple reason that real wages are falling less fast than real house prices (around 3% versus 5% last year). But a shift of 2% a year isn't going to get us to fair value in a hurry.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.