You ain't seen nothing yet: why house prices could fall by another 20 per cent – Telegraph Blogs

You ain't seen nothing yet: why house prices could fall by another 20 per cent – Telegraph Blogs

House prices would have to fall by more than a fifth from their current level to revert to their long-term average affordability of four years’ average earnings. Even after the modest reductions announced by Nationwide Building Society today, the typical house price equals more than five years’ earnings.

So would-be first time buyers frozen out of home ownership by the credit crunch and most lenders’ demands for at least 20 per cent deposits may draw comfort from the prospect of affordability reverting to its long term average – as measured by Nationwide since 1974. This data shows that property was most expensive in 2007 when the average house price equalled more than 6.3 years’ earnings.