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

Tradewind Recruitment: English Teacher

Negotiable: Tradewind Recruitment: This post arises as a result of the need to...

Tradewind Recruitment: Class Teacher Required ASAP In Uminster

£120 - £150 per annum: Tradewind Recruitment: I am recruiting on instruction o...

Ashdown Group: Head of Finance - Financial Director - London - £70,000

£70000 per annum: Ashdown Group: Head of Finance - Financial Controller - Fina...

Ashdown Group: Marketing Executive - Wimbledon, SW London

£24000 - £28000 per annum + benefits: Ashdown Group: Marketing Executive - Wim...

Day In a Page

Read Next
 

I’m not sure I fancy any meal that’s been cooked up by a computer

John Walsh
Labour leader Ed Miliband delivers a speech on his party's plans for the NHS, in Sale, on Tuesday  

Why is Miliband fixating on the NHS when he’d be better off focussing on the wealth gap?

Andreas Whittam Smith
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness