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Back to the 1990s
29th May 2008
The haste with which the UK housing market has turned around in recent months is remarkable. You know when economic events are moving faster than normal when you come to revise your teaching notes from a year ago and realise that they are badly out of date and in need of some serious revision!
Today the Nationwide Building Society reported that average property prices in the UK fell by 2.5% during May, the seventh month in a row that housing valuations have slipped taking prices to a level 4.4% lower than a year ago. The annual pace of decline is now the fastest since the housing recession of the early 1990s. More here from the Independent. There is no mystery behind the steep fall in prices; demand is tailing off and mortgage supply has been badly squeezed.
Property prices have over-shot beyond fair value and now the correction is well and truly underway. There is a real possibility that house prices will fall by more than ten per cent in each of the next two years. Rapid house price deflation will help to make a real difference to the affordability crisis.
Hugh Pym reports on the price slump in this BBC news video clip
Housing market charts
Housing_Charts_May_2008.doc
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.