Everywhere you look, house prices are crashing. Australia, New Zealand, Sweden, Denmark and a host of other countries have suffered major falls with more to come.
Prices wobbled over here, too, falling in November and December after former Chancellor Kwasi Kwarteng‘s disastrous mini-Budget sent mortgage rates soaring past 6.5 percent.
Incredibly, they’re now on the up again, rising 1.2 percent in February and another 0.8 percent in March, according to latest data from Halifax.
That’s good news, up to a point. A full-blown house price crash would wreak untold damage on the economy.
It hits sentiment by making homeowners feel poorer, while property-related industries suffer and not just estate agents.
Plumbers, electricians, kitchen installers, sofa manufacturers, furniture retailers and a host of other professions rely on a vibrant property market.
As does HM Treasury, as it generates more tax revenues from stamp duty when sales are swinging along.
Yet many first-time buyers would welcome a dip in prices as they struggle to get a toe on the ladder.
Instead, they’re having to pay more than ever before, which is the last thing many expected given today’s worries.
New figures from Rightmove show asking prices for new properties rose by another 0.2 percent in April.
That may not sound much but still adds £890 to the average price.
Today’s first-time buyers now pay £224,963 on average, which is the highest price ever.
What house price crash?
Stable house prices will give first-time buyers the confidence to make a purchase, if they can raise the deposit.
Nobody wants to blow several hundred thousand pounds on a property only to see its value crash soon afterwards, plunging them into negative equity.
Arguably, prices are cheaper in real terms, as prices flatten but wages rise. Average regular pay is up 6.9 percent in the private sector and 5.3 percent in the public sector.
Where property prices go next depends on how quickly the Bank of England gets inflation under control.
The Office for Budget Responsibility (OBR) reckons consumer price growth will have dropped from 10.4 percent in March to 2.9 percent by the end of the year.
That looks optimistic to me, as inflation seems a bit sticky, and I’m not the only one who thinks that.
But if the OBR is right, then the “swap rates” lenders use to price five-year fixed mortgage rates will continue to fall, even before the BoE starts cutting interest rates.
That will further reduce the chances of a house price crash.
In another positive sign, the stocks of FTSE housebuilders like Taylor Wimpey are rising as investors anticipate a recovery in sales and revenues.
Perhaps the biggest reason house prices haven’t crashed is that we aren’t building homes fast enough to keep up with the country’s soaring population.
The nation’s housing shortage is arguably an even bigger problem. It has spared us a crash but at what cost?
