Hard Times for House Prices?

The Evening Standard (London, England), February 4, 2005 | Go to article overview

Hard Times for House Prices?


Byline: ANTHONY HILTON

FIGURES from the Halifax yesterday suggested that if we are in the middle of a housing crash, it has a funny way of showing itself. If the January numbers are echoed for the full year, it would mean a further rise in the cost of the average home of about 13%.

Almost as the figures were being announced, Capital Economics' Roger Bootle, the leading houseprice bear, was locking horns with Sunday Times economics editor David Smith in a debate on whether or not the sector would have a soft landing. Given the personal involvement of four-fifths of the adult population in home ownership, the arguments are worth repeating.

Smith, who thinks there is little-tonothing to worry about, concentrated on the big picture. He pointed out that actual falls in house prices are very rare - they happened in the 1930s and in 1991-93 but both times the drop was only about 13%.

Today the factors needed to bring about a similar fall simply do not exist, he said.

Monthly mortgage repayments are well within people's capacity to pay as long as employment remains high and inflation and interest rates low. Second, the fragmentation of families and other social trends means demand for housing exceeds the supply. Third, overvaluation is much less than commonly thought because prices after the last depression were forced to very low levels.

And overall the economy is in nowhere near the kind of recession that would create waves of forced sellers and kill the market.

But while Smith drew comfort from the big economic picture, Bootle took the approach of an investor.

Housing is a bubble, he said, caused by a collapse of confidence in other methods of saving and by the easy availability of cheap finance.

This has driven the market to levels that are unsustainable. Such booms are always followed by busts and it will be the same this time because too many people have overreached themselves. The financial strains are already showing in that the yield on residential property in central London is now below Bank base rate, the ratio of personal debt to income has never been higher and repayment costs in real terms and without tax relief are a major burden.

None of this seems to matter, Bootle said, as long as people feel confident, but ultimately it is demand that drives the market. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Hard Times for House Prices?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.