Property prices on solid ground

Confidence, or the lack of it, influences everything from scoring a goal in a football match to believing that property prices won't crash as soon as you've got your hands on the keys to your new home.

Confidence, or the lack of it, influences everything from scoring a goal in a football match to believing that property prices won't crash as soon as you've got your hands on the keys to your new home.

Just as Arsenal striker Thierry Henry needs to imagine the ball in the back of the net if he is going to actually put it there so, too, do prospective house buyers need to believe that prices are going to increase ­ or at least remain the same ­ if they are going to buy a property.

But research issued by Cambridge Econometrics last week could dent that confidence. The research concludes that the gap between house prices and income is so great that the property market is in danger of collapsing.

It draws comparisons with 1989, when the market crashed leaving many home owners in negative equity. Such figures could frighten buyers who are committing to hefty mortgages.

But the situation isn't that straightforward. According to mortgage broker Savills Private Finance, the real measure of affordability is the relationship between average mortgage repayments and household income.

With average repayments about 17 per cent of household income, compared with 43 per cent in 1989, as a result of falling interest rates, the situation is nowhere near as dire. House prices may have risen to new highs but mortgages are also far cheaper. And the signs are that a low interest rate environment will be with us for a while. The record high that mortgage lending reached in April proves that buyers aren't running scared and that prices are affordable.

But while prices are unlikely to crash, the spectacular growth we've seen over the past couple of years, particularly in London and the South-east, is unlikely to continue. But even if this means we won't be seeing one-bed flats doubling in value in six months, buyers shouldn't be choosing properties with this in mind anyway. Far better to buy a flat or house because you want to live there and it suits your needs.

Even an investment property that you plan to let out should be bought with the intention of keeping it for 15 to 20 years. Over that time you will see an appreciation on your capital, which is more realistic than hoping for vast profits within five years.

 

Boarding party repelled

Equitable Life's annual general meeting passed without too many surprises on Wednesday in London's Docklands. Eleven rebel policyholders failed in their attempts to get elected to the board, while nearly 2,000 took the opportunity to vent their anger at the insurer.

But the real problem ­ getting guaranteed annuity rate (GAR) holders to agree a compromise ­ is unresolved.

Chairman Vanni Treves may take some comfort from the Mori poll finding that 53 per cent of GAR policyholders would waive their guaranteed annuities in exchange for an increase in policy value; it might not be enough. He needs 75 per cent of those by value of the policies and 50 per cent by the number who vote to approve. That's the real task still facing Mr Treves and the board, and it isn't a simple one.

* m.bien@independent.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Guru Careers: Application Support Analyst / 1st Line Support

    £25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

    Guru Careers: .NET Developer / Web Developer

    £45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence