This point is a bit vague as it was only a small piece of college work, let me know what you all think!!

Sources for reference:

Inflation - http://www.revisionguru.co.uk/graphi...inflation3.gif

Average Wage - http://www.ssa.gov/OACT/COLA/awi.gif

House prices - House price news, information and discussion - HousePriceCrash.co.uk

Why people shouldn’t worry about house prices

The current financial climate in the UK is very unstable, but the main reason for this, is the reporting of the situation by thepress, and people that believe in the press. The more you talk and contemplate something, the more you believe it to be true, hence the reason why the UK has actually talked itself into a recession.

I will be focusing on the current housing market, and the why people should notworry about house prices falling. This relates to both people buying, who are worried that they will buy only to find houses in their street for sale one year later at 5%, or even 50% below what they have paid. This also relates to people who already own their own home, who are thinking about renting and re buying.

By using official house pricing data, we can see a rough indication of how house prices increase, they double every 10 years. Now, this is a very rough indication of how the market grows, obviously through some 10 year periods, house prices will have decreased overall, and in periods such as 2000-2005, prices almost doubled within a 5 year period.

Average house prices, inflation, and the average wage collectively increase or decrease to create a stable economy.

As you can see from the visuals attached, inflation is constantly above 0.0%, meaning everything in life is constantly increasing in cost, and the average wage index supports that, with the average wage, consistently increasing. Now, if employees, and therefore house buyers, are earning more in the long term, then why would everything, but houses, increase in price?

This 5 year period, from 2000-2005, has great significance to the current financial situation that we find ourselves in now. The housing market spiraled out of control within this period, as it didn’t run inline with wage increases and inflation, so all that is happening now is the housing market is correcting that ‘mistake’ to run back inline with those figures.

The worry is that prices will decrease a huge amount, leaving many people financially insecure, but again, it’s a case of supply and demand. The current housing market allows a small proportion of society to purchase a house, due to the high prices, but if the prices were to fall considerably, the demand would grow. People earning a lot less, would be able to afford what they couldn’t before, opening the housing market up to a lot more people, increasing demand, which would obviously lead to house prices metaphorically, going through the roof once again.

Indeed, I think we're just looking at a self-correcting mechanism - ie, a market feedback loop.

The only worry, really, is for people looking to sell now, really, because of price depreciation.

But as property is usually a long-term investment, better to look at the long-term IMO.

The bad thing is, for someone to win, someone else has to loose.

In this case it's distressed buyers worrying about their houses decreasing in value, while the investor feels in long term it's a good buy....Looser/Winner

Hi guys newbie
I think until the first time buyers market is back houses will have to reduce. If you take away the first timers (no or very little housing market.)

Phil
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