Outlook: Panto-time among mortgage lenders

It becomes a bit of a pantomime when forecasters agree about the future yet disagree about the past. However, that seems to be the topsy-turvy way of the housing market. House price rises have been very modest this year, says Halifax. Oh no they haven't, retorts Nationwide. Both close ranks to agree that price rises will be modest in 1998. Either there was no boom, or if there was it was short-lived, and the housing market will be restored to steady, sustainable growth.

As in panto, we should all probably be highly suspicious of this traditional happy ending. The lenders are fed up with being portrayed as the villains behind a volatile market that in the past has exaggerated the ups and downs of the wider economy. They want to recast themselves as fairy godmothers presiding over an orderly housing market. Unanimity in the mortgage industry about prospects for a steady recovery, an end to boom and bust, is therefore a very predictable one.

They might well be right about next year. Past and future mortgage rate rises, declining consumer confidence and an increased supply of new homes coming on to the market should all contribute to a slower rate of house price inflation. At the same time, there is enough momentum in the recovery after the dark days of the early 1990s to keep the number of home sales and house prices at a healthy level.

But the underlying structure of the housing market has not changed. The supply of land and homes is relatively fixed, while long-run demographic changes mean demand is likely to continue to grow strongly. This adds up to increases in real house prices over the long term, with sharp fluctuations in the short term because demand can adjust much faster than supply over the course of a business cycle. The fact that inflation is lower than it used to be, or that some people still bear the scars of the late 1980s boom and subsequent bust, does not alter the analysis.

The only question is whether the shift to a low-inflation background will reduce the scale of the ups and downs in house price inflation. The answer depends crucially on the experience of the latest economic cycle, the first low-inflation recovery since the 1960s. In other words, it depends on what did happen to house prices last year. As any panto-goer would warn, you need to look behind you. Too bad Halifax and Nationwide can not agree what's there.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project