Are we too bearish on house prices? - MoneyWeek

Are we too bearish on house prices? - MoneyWeek

Sometimes we suffer moments of doubt. Sometimes we even think we might be too bearish on house prices. Then we look at the numbers again and think we might not be quite bearish enough. This week, I’ve been flicking through a report out from Shore Capital on the UK housebuilding sector. Jon Bell, its author, sets out his stall with a run through of his views on prices. They fit pretty nicely with ours.

First he points out that UK house prices remain “materially overvalued based on their historical relationship with earnings.” The house price to earnings ratio in the UK (based on Nationwide data) is around 4.4 times. The historical average is 3.4 times. To get back to that level implies a further fall in prices of 23%. ........