It was reported in the UK Guardian and other newspapers that average house prices have fallen for a third consecutive month.
The UK Halifax said that average home prices now stand at £237,808.
The Nationwide index showed average prices of just over 211,000 Pound Sterling – and the biggest single fall since 2008-2009.
This is to be expected and is happening globally. People don’t necessarily want to move now.
What is more interesting is that the UK media isn’t reporting on another key thing; namely UK real house prices are lower than they were before the 2008-2009 financial crisis and that was the case even before corona.
At the height, just before the financial crisis, Nationwide was reporting average prices of around 183,000GBP.
So house prices are 28,000 Pound Sterling “more expensive” 13 years later.
That is a “rise” of about 1.1%-1.2% per year compounded and is lower than inflation.
According to the Bank of England’s inflation calculator, UK inflation has ran at an average of 2.8% since 2007-2008.
If house prices would have stayed pace with inflation, they would now be about 255,000 Pounds on the Nationwide survey.
The following graph of UK real house prices again illustrates the point:
Earnings have also outpaced house prices with the exception of London:
Of course regional disparities play their part. House prices in London did recover, even in inflation-adjusted terms, before the crisis.
In the UK as a whole house prices might not hit their real terms peak for quite a few years yet.
What makes the figures even more telling is that it also doesn’t include the true costs of home ownership such as taxes and maintenance.
Renting certainly isn’t dead money.
In the long-term how has property prices compared to the stock market?