House prices have fallen by 2.5 per cent, so what?!

With house prices falling by 2.5 per cent in March 2008 you might think the whole country is on the verge of meltdown, but what does it really mean for us? The media may as well start saying that anyone with a mortgage is financially doomed, but are they correct?

Overall I'd say that there will be a medium fall in house prices in 2008, something like 5 per cent overall, at worst. What a lot of the reports in the media are failing to point out is that prices in March 2008 were still 1.1 per cent higher than March 2007. Yes, it is the biggest fall in house prices since the 1990's but we've not actually gone backwards on last year, yet! As ever the media are creating more drama out of this than neccessary.

The other point is that over the past few decades house prices have always increased. If you look, for example at the last decade the average UK house price has risen by something like £120,000, or by 171 per cent! So in the grand scheme of things a slight fall of a few per cent, combined with the fact that prices are still just over 1 per cent higher than this time last year, that isn't that much to panic about at the moment.

The UK has a good economic base at the moment, and these are supporting house prices; essentially a good, strong labour market combined with really very low interest rates. It would make good sense that the labour/employment sector is the main driving force of the housing market - i.e. with more people in employment than ever, in fact at a record high and continuous falling unemployment, more and more people will want to buy a house.

I think anyone 3 or more years into buying their home would have to be very unlucky, or have serious amounts of additional unsecured debts like loans or credit cards credit cards, to find themselves in a negative equity situation at the moment. If you have not managed to put a deposit down on your mortgage and so now have a 100 per cent mortgage you may end up owing more to your mortgage provider than your home is actually worth. (sumber: Simon Duffy)