Saturday, March 05, 2005

House price crash on the horizon?

Two separate news items caught my eye yesterday about the state of the housing market in the UK and abroad. The first was a very good article (as always) in The Economist suggesting that house prices are massively overpriced and that it is now cheaper to rent than to buy, especially as most people tend to move after seven years. It went as far as to say that the old wisdom, "Rent is just money down the drain" no longer holds true.

The second item was actually on BBC2 last night also considering the Great House Price Crash of 2005. It had heart warming stories of career landlords no longer earning profits on their multiple rental properties since interest rates had increased five times. Tears were welling up in my eyes!! One expert also blamed the risk of a house price collapse on the unwillingness of first time buyers to prop up the market. This makes the whole housing market sound like a pyramid scheme, indeed, it could well become one if the most recent first time buyers lose their shirts in the coming crash.

Naturally, none of this is of any consequence to Liberal Democrats offering sweetners to First Time Buyers when house prices are at their peak!! If they had any understanding at all of economics, they would reduce the stamp tax threshold to ensure no first time buyers did such a stupid thing as buy a house right now!!

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