The reporting of house prices has become something of an obsession in the media. A wide variety of views are aired most of which have proved to be wildly inaccurate with the benefit of hindsight. One statistic that looks likely to revert to its long-term trend is the relationship between average house prices and average annual earnings. The credit orgy of the last ten years is now over and with lenders now returning to the prudent lending practices of previous decades it is not unreasonable to expect that average house prices will fall to around four times average annual earnings. If you're wondering how much further prices need to fall then the chart below (published in today's Bank of England Inflation Report) should give you your answer.
Steve Petty, Commercial Property Lawyer