Leading article: Property booms and busts

Share

Falling house prices, to which we must now suddenly become accustomed after a decade which has seen property values treble, are usually taken to be "a bad thing". And, indeed, conventional economic analysis suggests that there are plenty of reasons to worry.

First, it cannot be a comforting feeling to watch the value of what is for the vast majority of people their main financial asset decline, however modestly. Those who have bought property on the back of speculative buy-to-let bubbles, and those who are counting on their house as their primary means of securing a decent retirement income, will be especially perturbed by today's news from the Nationwide Building Society that the average British home is worth 0.5 per cent less this month than last. Second, although economists disagree, as ever, about the extent to which fluctuations in house prices have an impact on people's livelihoods and spending patterns, it is surely not the sort of thing that will bolster confidence. That new Honda Civic may have to wait, and the jobs of those who make the cars in Swindon will be that little bit less secure. Not good.

However, that may only be half of the story. The UK property market, with its greater speculative content and easy credit excesses, may be developing into what the financial community would call "just another asset class". In other words, householders may have to become a little more used to the idea of more volatility in the value of their homes. They might also reflect that the nation has lived through property recessions before in the mid 1970s (during which time inflation masked the extent of the fall in real property values), and, still painfully remembered for its negative equity and record repossessions, that of the early 1990s. Although residential property, of its nature, will never see the same wild fluctuations as foreign exchange or share markets display, it could easily be much more of a roller-coaster ride in the future.

Another part of the story is to see decline in house prices as a benevolent social phenomenon. For while the effects on the wider economy may well be baleful, for those looking for their first home, a reduction in house prices coupled with a decline in mortgage rates, both on the cards for 2008, means that that starter home may just hove into reach and that is a good thing.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: QA Technician

£16000 - £18000 per annum: Recruitment Genius: This leading manufacturer of re...

Recruitment Genius: Office Administrator

£20000 per annum: Recruitment Genius: Due to expansion, an experienced and hig...

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Plumbing & Heating / Bathroom Trade Counter Sales

£22000 - £26000 per annum: Recruitment Genius: This well established London ba...

Day In a Page

Read Next
 

Children shouldn’t even know the word 'diet' — obesity and lack of body confidence are symptoms of the same cause

Natasha Devon
Rihanna, Nicki Minaj, Madonna, Deadmau5, Kanye West and Jay-Z at the Tidal launch event in New York  

Tidal: An overpriced music streaming service that only benefits the super-rich members of a messianic-like cult? Where do I sign up??

Michael Segalov
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat