Prices bounce back...... in 2023 !

If you read the Guardian, like myself, then they had some gloomy news today, stating the average price of a house in the UK will not return to its 2007 peak until 2023, this according to a leading academic.

If you're a homeowner, you'd better sit down with something stronger than Rington's tea and some comfort food, maybe some Rolo doughnuts, which I found on offer this week - thanks to the credit crunch, it's not all bad you know......

Andrew Clare, professor of asset management at Cass business school in London, said the housing market would get "a lot worse" before it started to pick up.

Using futures contracts based on the Halifax house price index, he has calculated that, in 2010, the average will be 40% lower than the peak of £199,600 in August last year - about £120,000. "Worse still, according to these prices, the Halifax index will not recover its August 2007 level until 2023," he said.

Clare said his survey was "very bad news" for anyone who bought a house last summer and predicted negative equity would be a big feature of "our economic landscape for years to come". However, he also sees greater affordability, with the ratio of average house prices to average earnings declining as property prices fall, assuming that earnings rise at an average nominal rate of 5% a year.

"By 2010 the price-to-earnings ratio would be much closer to a sustainable level - very close to the old-style mortgage multiples that lenders used," he said.

Halifax said last week that the average price of a house fell 13.3% in the year to September - the biggest drop since records were first kept 25 years ago.

However, specialists giving evidence at a Treasury select committee yesterday gave a less gloomy outlook than that painted by Clare. David Miles, professor of finance at Imperial College London, told MPs that house prices would stabilise after a further 5-10% drop. He said a total 20% drop in prices should be the point at which the housing market rejuvenates.

The ripple effect is now starting to hit Scotland and Moray, just look in the estate agents windows and in the local press. There's many more houses being offered at fixed prices and rental prices are steadily increasing.

Word has it that several local estate agents are struggling at present and if the sale market doesn't improve soon, we may well see many more Big Issue vendors on our streets ! Though they have had it very good for the last few years, let's hope it doesn't come to that.

The Moray housing market is very resiliant though, if only purchasers could still get a good mortgage offer. As always, shop around my friends, the current economic slowdown is affecting all businesses, with many being prepared to negotiate or offer better deals, just like my Rolo doughnuts !

All the best,

Mr Jackson