New Statesman - Where do house prices go from here?

New Statesman - Where do house prices go from here?

A big question is: where do house prices go from here? According to the Halifax, house prices peaked in December 2007 and have fallen 17 per cent since then. Real house prices have fallen even more, by around 27 per cent. Homeowners on trackers have done really well. Their payments fell sharply as interest rates fell to historically low levels after the Monetary Policy Committee (MPC) cut the Bank of England rate to 0.5 per cent. This has kept delinquencies down, but it is unlikely to continue when interest rates rise. This will inevitably have a downward impact both on house prices themselves, and inevitably on consumption also.

Based on house-price-to-earnings ratios (HPE), which is a measure of affordability, it does look as if house prices are unsustainable at current levels, and hence still have quite a long way to fall.