More news out today on House Prices; in the UK the price of houses I think is used as a barometer of economic wealth like no other. It is the one measure that people can readily grasp. Ask someone in the street to even tell you what GDP stands for and I doubt you would get much of an answer. Ask them what house prices have been doing for the last year and you might well get a lengthy diatribe.
So the great recession has been seen as a housing recessions, sub-prime in the US, Northern Wreck and the 125% mortgages over here. This is really not the whole truth, but it seems to do for public consumption.
So now in the UK we find that once again the price of houses are dropping. This is only to be expected as the provision of mortgages has dropped right off. Banks are being ultra cautious with their rates and whacking customers with margins of over 2% which is huge (think £100k mortgage, £2k per year interest for 25 years, a 50% gross return for the bank).
In these conditions prices are not going to rise for properties that are not attractive to overseas buyers. Thus central London, home of flats that are there purely to store art and antiques for their Chinese owners, are somewhat exempt.
Elsewhere we will see a further slow decline, perhaps as much as 10% over the coming year or two. One big prop that will stop the rot is the collapse of construction and housebuilding netted together with the rapid immigration. The UK is not the USA, which has lax planning and unlimited space for its wooden housing.
I wonder how long it would take to change the mindset of the UK population away from seeing houses as the sole asset class for storage and increase of wealth though - longer than the trough will turn out to be is my guess.