What Will Happen to House Prices in 2008?

There is uncertainty about the future direction of house prices in the UK. Forecasts range from a collapse of 20%, to moderate increases of 2-3%. The mean prediction is probably for house prices to stagnate. However, within this house prices are likely to vary within geographical regions. For example, Scottish house prices have continued to outperform the rest of the UK.

Are House Prices Falling Now?

Amidst all the gloom and dire predictions it is worth bearing in mind, House Prices in the UK are still rising. After falling in the months of October and November, house prices in December rose leaving an annual house price inflation of 5.6%.

It is also worth remembering that the UK Housing Market has a recent history of outperforming expectations and predictions. This is because many people forget the shortage of supply compared to demand. Interestingly long term predictions of house prices suggest a 30-50% rise within the next 10 years.

However despite these underlying strengths, arguably there are a few factors which are different in 2008

• Global Credit Crunch making mortgages more difficult and expensive to get.
• Decline in affordability as house prices have increased above incomes.
• Interest rate increases starting to bite, made more effective with high debt levels in the UK
• Change in confidence and expectations. - People no longer see the Housing Market has a guaranteed way to make money and wealth