House prices to fall for three years – maybe

After all those years of rising house prices, it seems that home owners have to face a new reality now. The value of their homes could continue to fall for the next three years.

The Guardian is reporting that property futures indicate that house prices will move only one way until 2011 – downwards. There will then be a gradual rise back to current levels over the following six years, apparently.

Gloomy news indeed , if you own property and need to sell. It’s also bad news for those hoping to jump onto the property ladder. Should they buy now, or wait for prices to fall further?

Knowing that house prices are likely to fall continually for the forseeable future, who would buy property now? That’s the problem, of course. The more buyers fear further price falls, the more they stay away from the house market.

The prediction that house prices are in for a prolonged fall, then becomes reality. Or will it?

The property market is subject to the fundamentals of supply and demand, just like any other marketplace. At the moment there is massive supply but no demand. Prices fall.

There will come a point, though, when buyers find that buying property at lower prices, becomes a better proposition than lining a landlords pocket with monthly rent cheques. As rents increase (because rental demand outstrips supply) then the balance between renting and buying will change.

We won’t really know when that tipping point will be reached. It is definitely at least 12 months away, but I doubt that it is three years away. We Brits like owning our own homes too much for house prices to fall year after year. At least I hope that we do.