After spending most of his married life in a small terraced house, with a small easily managable mortgauge, my brother suddenly decided to buy a new bigger house and take on a substantial new mortgauge . He had bought into the hype that house prices would continue to rise and rise and rise - a sure road to riches. He reasoned that our mothers house bought in 1970 for £1500 and now valued at £150,000 was proof of this. So basicly he recons on his £200,000 bought in 2002, being worth 20 million in just over 30 years. I told him he had watched to much of 'Changing Rooms' and 'Property Ladder' etc. etc.

james bannister , south shields, england

In 1999 New Buyers average income multiplier was 2.29. The UK had low inflation, low unemployment. The value of the Housing Stock was 1.7 trillion against Mortgage Debt of 400 billion. The FTSE was at 6,930
In 2007 New Buyers average income multiplier is 4.36. The UK has low inflation, low unemployment. The value of the Housing Stock is 3.8 trillion against Mortgage Debt of £1.3 trillion. The FTSE is slightly less than &,000 but if past crashes are anything to go by should make a final rally, before the market analysts realise that so few houses have been added to the National Stock in the last decade that the value should have fallen.

David, Launceston, Cornwall

you mean what goes up CAN come down!! human greed is a wonderfull trait and 'property developers' deserve to be badly burnt.

Tony Shrimpton, London,

It's all hype.There is a difference between houses and appartments.Apartments are the concern,every where ever you go, developers are building more apartments ,trying to get as much as possible from the plot of land that has cost them a fortune to buy.Spurned on by the planners,this has been a costly mistake for both initialy for the developer and investor,but also the councils ,who have lesser people to collect taxes from. Houses on the other hand are usually freehold,have no management fee's,have outside space and are a better bet to buy.Families prefer houses to apartments for the reasons above . New apartments can be more expensive than new than new 3 bed town houses,depending where you buy. this is silly and the current predicted crash will not affect house prices long term,but will give a more realistic value to apartments

Steve Ball, Cheshire, UK

Internationally speaking, prices for single family homes and apartments or flats, have rocketed upwards with no real economic power to justify that acension, this has occured everywhere in Europe from eastern Europe to Spain to London to Nurnberg. Where I live, the prices are very expensive (Germany) Bavaria, Nurnberg and we were forced out of the the market, forced to move ouside the city of ERLANGEN, and in to a small village on the other side of amountain, nice nature and beautiful view, but somehow, boring and isolated. I just drive to the next larget urban environ if I need culture, the gas costs are far lower than the ratio of house unit price versus high energy cost, or in other words driving 30 kilometers once a week or maybe trwice is cheaper than the annual cost over 20 years for a house in an urban setting plus the mortagage interest. Probably I´ve saved 80 % and can only complain about ´the 30 minute to get there.

George, Nurnberg, Germany

Immigration and a shortage of supply mean that the only way for house prices is up. And if there really is any sign of weakness in the housing market, the government will just slash interest rates, they will never let it crash. Buy while you still can or you'll be renting forever, paying for someone else's comfortable retirement!

Tommy Bellinger, London,

A correction of 40% would be ok.
50% if Britain is lucky.

riccardo, brussels,

1) only 11% of the uk is built on (loads more land)
2) estate agents sells the property , the vendor accepts the valeuation and the appicant offers what thay think is correct , then the price is confirmed by the lendors survayor
3) only 1 contractor is bidding for the 2020 games (all the others have to much work on) to many large projects in the south east
4) property speculators want the market to collapse THATS WHERE THEY MAKE THERE MONEY
5) you can lose money on property late 80s early 90s look it up or just try and remember
7) luke in perth WA be very wary of your own market you guys have never seen a property market crash
8) a quick over view Highgate N6 blue chip post code level off prices over the past 3-4 months Tottingham 50% price increase in the last year, where do you want to live
9) a lot more factors to look at before the market plummets, to the people who are waiting for the market to fall take a ticket and get ready for the long wait, Merry Christmas

sean , High Barnet London,

Please don't believe the 'Supply & Demand' argument. The reason house prices have rocketed is silly low interest rates over the last 5 years which have lead to speculative buys in the market which, in turn, have expanded this bubble to ridiculous proportions. Now all this cheap money is drying up, a confirmed credit crunch and with high inflation keeping IRs high (don't bet on any cuts soon), prices will fall and could do so significantly. After such a big boom, there's just one way to go and that a large bust.

Dave, Maidstone,

Yes,indeedy.Some flats near me have gone on the market for "ridiculous" prices over the last 15 years.If I put mine up for sale today it would have tripled in price since the late eighties.Crazy!

H.D, WsM, UK

If house prices have trebled in price over the last 10 years or so, which for sure is the case... Then the correction in house prices ought to be MORE THAN 30 to 40%. House prices should fall be AT LEAST 50%. Roll on the Great House Price Crash!

Michelle , Surrey, England

Can't wait for the bubble to burst. There needs to be a correction, so that the next generation can afford to buy houses.

Hamad Lone, London, England

Merry Christmas one and all :) . Who knows in a year or two , I might be able to buy a house of my own and then maybe even consider starting a family ... once again ... Merry Christmas one and all .

Benzo, Nr Chelmsford,

At the sharp end here in zone 2 of London selling and renting local property, the steep rises of the last year have been driven by a massive shortfall of properties being marketed. As prices began to rise sharply, owners chose to release equity rather than to sell in to a buoyant market. The number of buyers, particularly first timer's, have been at a twenty six year low according to official statistics, thus proving that the reality was not due to increased demand. Our own experiences and that of other local and London wide agents prove this.
It is not true as the article suggests, certainly in London, that rents have only increased mildly. As first time buyers have been squeezed out of the race the pressure on rental prices has caused an increase of between eighteen and twenty percent on average, in just the last six months! Undoubtedly, a major correction of the property market has begun and indeed of the wider global economy!

Simon Randal, London, England

"This is nonsense. House prices never fall. And even if they do, most people are in it for the long run so it won't affect them." - Tommy Bellinger, London

You have a very short memory, this will not be the first time they have fallen.

Chantel, UK,

Get real - there is a housing shortage. Even by the Governments own figures we need to build at least another 3 million homes (and that's without taking into account that they don't have a clue how many people are really living in this country). If demand out strips supply prices rise. Only when this situation is reversed will there ever be any serious re-adjustment of prices. There may well be short-term price falls, but in the medium to long term prices can only go one way. up. And if the predictions that UK's population will grow to 110m by the end of this century are correct I think we can safely say we will never see houses so cheap again.

Guy, London,

HSBC rightly point out that there has been NO supply shortage as demonstrated by a) only a mild increase in rent prices, b) the obvious lack of hundreds of homeless people camping out in Hyde Park.

If you believe the bs about demand outstripping supply and neglect to consider the supply of credit massively increasing - then it's time for a massive correction in the way you think.

Some people with vested interests will continue to trot out the old supply/demand chestnut - but remember, there was massive demand in USA for houses about 18 months ago.

Modern Slave, London,

Bring it on!!!!! Tumble, crash away!

And quite frankly, I hope everyone who has reaped profits from the scandalous positive discrimination of this country - those on benefits who were given their homes, that I paid for out of my taxes for the housing stock, on the cheap to buy, keyworkers who get put to the front of shared ownership lists and are the only ones allowed to even buy a lot of properties etc - get hit hardest most of all. I'll just laugh.

Graham, London, UK

House prices are simply a function of supply and demand. How can there be 30% overvaluation and the government saying we need x million new homes?

Perhaps there are too many two-bedroom flats and not enough cheap family homes near good schools?

Simon, Wokingham, UK

having lived in london,I have to say what a dire place it is to live...crime through the roof,drugs on your doorstep and £500,000 to live in a house where I wouldn't go out after dark.
Some of the worst restaurants and pubs too.

Think london has got a big shock coming when reality that not all areas are like mayfair and chelsea set in.

david , london,

the haves and have nots argue this out on the page but I second Gavin, the important thing is affordable property for all and the government needs regulation of estate agents to ensure that has a chance to happen.

sam, london,

Houses, especially in London, have been overvalued for years because there is too much demand and too little supply. The economy has little to do with it except that it has made London a global capital where the property market is not too affected by what happens in the UK. Overvaluation is to do with huge levels of population growth from professional middle class immigration and, where I live, not one single new property built in the last 10 years. We put our house on the market and within hours we had different purchasers bidding above the asking price. Our neighbours have all built basements as they could not find suitable larger homes to move to. I can see London prices levelling off, but they won't fall unless there is a high level of executive unemployment and the government puts an end to the unprecedented influx of people and the paltry number of new builds.

Charles Bartlet, London, UK

"its crazy that although house prices in london have risen up to 20% in 2007 ALONE, a 0.6 % drop over one month is presented as a disaster."

James, the problem is that the current scenario is a bit like a shark that has to keep moving to survive. Plenty of lending have been done on the assumption that prices will keep rising, and many people have stretched themselves so far that they will actually be unable to keep hold of the asset if prices stagnate. So any sustained plateau could actually be the trigger for panicked selling, and the whole thing will chain reaction into a downward spiral with its own runaway momentum, the flipside of the mania that drove prices upward.

Which will be funny.

Phil, Vancouver, BC

"This is nonsense. House prices never fall. And even if they do, most people are in it for the long run so it won't affect them."

I assume that this is a spoof post? We have of course heard many sheep trotting this kind of thing out over the past few years. It is, of course, utterly false, and we're about to experience the refutation, in glorious technicolor.

Phil, Vancouver, BC

to you londoners who say that house prices never fall (Tommy of LON),
you should do some very basic thinking, if house prices never fall, based on prices from the 1500's, a typical 2 bedroom average london house would be worth over 10million pounds!youre a fool for thinking that prices never fall! they will fall in london and they will fall hard! sell your house now and buy it back in 18 months time for 20% less!!

luke, perth, australia

It's good to see an influential commentator from a respected institution talking sense at last, but where have he and his colleagues been for the last few years? It's been absolutely obvious for a while that there is no housing shortage, because rents have not risen significantly and the the streets are not overflowing with the homeless. But, even the government seem to have fallen for that nonsense. By 2020 much green space in Southern England will be built over, for what - to push prices even further down as homes remain empty. It will be great for first time buyers but absolutely terrible for any investor who has been mad enough to hang on to property. They'll be lucky to sell or rent at any price - so much for property as a pension! Think it can't happen? My aunt sold a fairly large 3 bed semi 12 years ago for only 12k. Why, supply in the area significantly exceeded demand. Wait and watch - it could very easily happen again.

Clint, Staffs, UK

Its ok for HSBC to say that property is overvalued by 30% now its gone public, but like most other institutes they kept quiet when prices were rising 10% YOY and didn't have the bottle to stand up and speak out.
Secondly 30% if prices fall today and hit the correction level in a very short time, unfortunately these kind of things take months sometimes years to bottom from the peak and each year that will chip away at the 30% falls until we get to 2012 and see that actually in nominal terms prices have fallen just 10-15% with inflation eating into the rest.
Its what happened last time

Adam, Cardiff,

This is nonsense. House prices never fall. And even if they do, most people are in it for the long run so it won't affect them.

Tommy Bellinger, London,

Folks, if the banks are now admitting it, it is much worse and it will get worse. Get out of debt now because cash will be king in the coming months and I foresee previously proud men begging for mercy from implacable and merciless banks and mortgage lenders who have conned them with sweet nothings of untold riches from the property investment.

anthony , london, england

It would seem obvious that property is overvalued as you would normally expect rents to be higher than the equivalent mortgage costs for a property as they have to cover both risk and running costs for the house. If rents are lower than the equivalent mortgage then the difference must be due t speculation on the part of the homeowner that his properties value will rise more than the total loss he is making on his rental returns.

This would point to a speculative bubble in the current market which will certainly burst causing a lot of pain and probably a recession.

Not sure how a collapse in sterling would lead to a fall in interest rates though. If interest rates were to fall less global investors would want to hold sterling so this would lead to a further collapse. The more usual response to halt a falling currency is to raise interest rates to increaseinterest in holding the currency! Perhaps someone could explain this?

James Quin, bristol, uk

That 30% the HSBC are struggling to explain is easy really - it's due to banks lending at toytown interest rates to anything with a pulse. Once this is repeated ad nauseum growth expectations become ingrained and it becomes a license to print even more money, skim a bit off the top, and securitise away from the balance sheet; allowing the next round of idiots, brainwashed by years of scurrilous media ramping and egged on by the bovine stupidity of the average Briton.

The fact that they are at last ATTEMPTING to explain it suggests they sense the game is up, and in moving towards vindication earlier than the average vested interest, they also get to keep some of the land and property they lent against, with money they never had.

Can we all go home soon? I'd like one, but i can't afford it.

Dave Hall, Stafford, UK

Excellent news and just what I was hoping for !. Now hopefully wont see many of those rip off estate agents smiling anymore.

Jim, London, UK

Agreed - London is on the slide as well as the rest of the UK. A correction is well overdue and necessary to return some balance to the market. 40% is a fair figure in terms of how much values could/should fall. However, I'd like to know how the BoE will justify rate cuts when inflation is booming...oh no, hang on, they don't need to. They're fed ridiculous inflation stats (2% inflation? What rubbish) and have proved before (Aug 2005) that they'll cut rates simply to save the housing market. Pathetic. If they do indeed cut rates, it'll be because they're preparing to hyper-inflate us out of this mess and wave goodbye to sterling. This is what we get after 10 years of 'prudence' Brown at the helm. The man who promised no more boom & bust has engineered a massive boom and left Darling to cope with the bust.

CP, London, UK

A rare burst of sanity devoid of spin and hype. All the more refreshing that it comes from HSBC and not simply an independent body.
There is hope yet that sanity will eventually prevail, and that the young will not become debt slaves for most of their lives chasing elusive capital gains.
Property is for homes, not rampant speculation. Some will get seriously burnt in the readjustment - that's the price society pays for Brown's "no more boom and bust" lies.

Dave, BEDFORD,

Finally the banks have admitted it, now lets hope that the property speculators stop using "there's a housing shortage line" and we can return to affordable homes for all.

Gavin, Reading/London,

...and the rest! Why is it that oil, food, public services, transport, etc, inflation is immense (take 14% a year on transport) yet we always have such fake measures of inflation put out by the gov't of ~3%? What then if we lower interest rates to fuel this ponzi economic miracle? Surely the real measure of inflation is ~7-10% and interest rates should be @ 10%? Then we'd see how much houses are really worth.

Richard, Guildford, Surrey

its crazy that although house prices in london have risen up to 20% in 2007 ALONE, a 0.6 % drop over one month is presented as a disaster. lets get a sense of proportion.

james, london,