People are mugs - house price increases are inflation. Unfortunately, people are seduced into believing that property prices equate to wealth and can borrow in a risk less way against these 'assets'. This is not wealth but an illusion of wealth.

Iain, Sydney, Australia

In real terms (inflation) not in value.

Naturally some will be discounted as vendors have to move others do not.

We are not producing land therefore the resultant product will hold its value and increase.

The market is always slow this time of year, ask anybody in this business - the market is at its peak between April and the end of July with a slight increase in September.

Is your money safer in property or Northern Rock shares.

john, clevedon,

Housing costs will NOT remain static through next year, they will fall between 10% and 20% and lots of people are going to be in great financial trouble.

hillus, Perth, Australia

Prices need to fall. We need to get some reality back to the housing market. A two up two down terrace in my area would sell for 250K in 2005. Now with some cheap laminate flooring and a few scatter cushions vendors are asking 350K to 380K for same two years on. Average salary here is 25K. There is plenty of supply but buyers are sitting it out and not prepared to strap themselves up with so much debt to buy a box. This bubble is far bigger than the one in the eighties. POP.

Lara, Hove, E. Sussex

The problem is that if prices are falling - no one not even first timebuyers will want to buy.

Who would borrow 100,000 on a property that is falling £500.00 per week?

There is nothing wrong with renting! - save money for when the prices start rising

ah the psycology of the house buyer

george enock, tunbridge wells,

I still find it amazing that people are suprised that the housing market is not going to continue rising at 10% - 20% every year.
It is hardly rocket sience when incomes on average are rising at 3-5% that at some point people will not be able to afford the exorbitant prices.
Who exactly is going to be buying these houses as they rocket ever upward ? Duh.
The link between incomes and prices has to be restored, whether its a crash or a price correction. Ultimately equilibrium will prevail.

Loop, Derbsyhire, UK

Bank rates may come down but the banks have been increasing their mortgage rates when rates have been steady so will they pass on all of the rate cuts?

Banks such as HBOS have already said they are going to be concentrating on profitability rather than market share (ie Rip-off customers stuck on their variable rates) and some of the other banks would be wise to decrease there exposure to UK mortgages (A&L, B&B etc) as rumours in the city risk turning them into another NR.

I still think the supply and demand argument holds water, esp as those that have over extended will not be willing to sell up for less than they paid unless they have to or are made to, but it will be people competing at reasonable multiples of their salary not 6 or 7 times their salary.

It'll still mean only those with large savings or large incomes will be able to buy anywhere, even as house prices come down.

The supply and demand of too little family homes is one thing.
The over supply of flats is another.

Chris, London,

NR is currently doling out MY (taxpayer's) money - it's borrowed, what, 24 billion from the BoE? Why then has a friend on a joint income of about 40k just been given a mortgage by NR at about 5x this and at an interest rate which is almost certainly less than the supposed punitive rate charged by the BoE to NR? If it wasn't so tragic in term of the UK economy this would be a joke. The BoE and FSA allowing a discredited bank to play fast and loose with our money. Maybe taxpayers collectivelly should just stop paying back their loans - there's little the banks could do if that happened, far too few judges, bailiffs etc to deal with the legal consequences. Or better still, maybe the BoE and FSA could just do their jobs properly and protect the careful majority rather than the reckless minority.

Clint, Staffs, UK

Why would anyone support a financial regime where paying 50% of your income on somewhere to live is thought acceptable?
It baffles me when the so called experts say that the fundamentals of the market will support current price levels! Wake up! There is no housing shortage. How many people do you know with nowhere to live?
Price crash,bring it on let's get back to a sensible p/e ratio of 3 for a standard 3 bed semi.

Richard Stevens, Callington, Cornwall

It is obvious what will happen if house prices do not fall.
Do not ask me to explain-it is obvious!
I know what is best for the UK and for our children.

nic, Royan, France

What a joke, the housing market is. One year, an estate agent came to price my house. He said, "well the house price inflation rate is 15% this year, so the price is.....240K". This is how prices are created !!!

Robert Parnell, Harrow, UK

David of Sale, Cheshire.

We relocated earlier this year and put the equity in the bank. We are now renting a very large house for 1200 per month. Next door (identical property) sold for about 550 000. To buy this house would therefore cost around 3000 per month in finance.

So we are paying about -(minus)1800 in "dead money" per month.

The equity from our house sale is earning 5+% - admittedly below the real rate of inflation but only by a bit. The "dead" money that we could have used to pay for a mortgage on an asset that looks shaky is going into some of these 7+% monthly saver accounts that are about.

Anyway, just read the report again as you suggested and am still feeling happy with our decision.

Omid, Hungerford,

Mark, London. However far prices fall in the next few months, you should still wait longer. If potential buyers dive in after only a modest percentage fall, the whole bubble is at risk of being reinflated. Once buyer confidence is seriously dented by falls of 30%, 40% or more there will be a lengthy period of flat prices at the bottom of the market. Wait for this and you'll have your pick of properties at bargain prices.

Clint, Staffs, UK

From what I can see The Bank of England no longer controls interest rates. The lenders do and they are putting them up and making what they will lend harder to obtain. If the BOE is to set rates against inflation then the only way is up. I was talking to a lady in a filling station this morning and she told me she had put up prices 3 times this week, total of 5% rise. Food is going through the roof as is everything else including all the taxes and fines we must also pay. 2.1% inflation is clearly untrue. If the BOE don't put up interest rates they are not adhering to their mandate, not that that will make much difference anyway.

You can fiddle the inflation figures all you like but the market will have the final say and we are in for a hard time.

Simon, Chatham, kent

In the last 10 years house prices have spiralled disproportionately and are now massively inflated.

Why the hell don't you journalists frame this situation accordingly. What about a headline saying "Inflated Prices Might Finally Burst".

Do you remember what you were all writing a few years ago? Prices going up, up, up. So why, now its not so pronounced, have you forgotten those financial bearings? Why do you write stuff suggesting price drops are doom, gloom, and suffering? Why? - its not difficult at all to understand the economics of this, but articles like this don't represent it.

The B of E should not reduce rates until house prices normalise ie fall, very substantially. Their policy is feeble minded and disgusting.

Joe, Manchester,

People seem to think house prices will continue to rise indefinitley! Look back to history - house price boom and bust cycles over the past 100 years. House prices will fall (probably dramatically) over the next 2 to 3 years, so will unemployment rates and the stock market. The only people talking up the market (House price crash - lets face it, its already starting) are estate agents, recent buyers and people who have re-mortgaged their homes to support an unsustainable way of life. If your in the market for the long term - 20 to 30 years, you will probably be okay!

Neil, Burnley, Lancashire

I was probably lucky and got out of the London property market on time, selling my flat in July just before the bad news from the US hit the real estate world. With the cash of that sale in hand, I recently went to Punta del Este, Uruguay, the new 'value for money' destination for people in the know. With the reliable help and professional services of www.uruguayproperty.com I purchased a magnificent villa with pool and garden on the doorstep of one of the best golf courses there, having barely spent 20 % of those London proceeds. So, I guess my spare change could finance the life of Riley for years to come.

Mark Hastings, London UK

Mark Hastings, London, UK

Population density in the UK is 250 per sq km and Japan 339. The population there was growing in 1990…the year when house prices started falling for the next 15 years—they added lots of people over their boom period and during the decline. (n.b. Japan has even less workable land because of earthquake zones and mountains, Lower unemployment and interest rates.)

UK Population millions
1990 57.3
1995 58.0
2000 58.9
2005 60.2
2010 61.5

Japan Population
1980 116.8
1985 120.8
1990 123.5
1995 125.5
2000 127.0
2005 127.9
Source: United Nations.

We have a housing stock of 26m. Assuming 1m empty properties, there are 2.4 persons per property. There are issues about location, but then how come prices rose everywhere? 2.4 is sufficient, unless we assume that all children live on their own, there are no couples left in the country and there are not usually 4 immigrants living in one house. London has City worries and would see immigrants leave (so many came here) if the economy declines.

Raj, London, UK

House prices here in Spain are in FREEFALL, yet there are still some very stupid British people who are still buying. The British are unbelievable, Must buy, must buy.

And as some people have commented, the press are reporting it as a problem. It is a huge relief for a large number of people. If prices fall, younger people will be able to buy, and perhaps stay in England to save it from the mess that it is in, instead of emigrating and taking their skills else where. Mind you, there is only so much work abroad for media studies graduates.

David, Madrid,

I have lived in my house for 18 years and in that time its value, like my weight, has gone up and down like a yo yo! But it's my HOME and will be for another 18 years at least so unless I suddenly decide to move its value is on paper, not my bank account. I will watch the prices with interest not panic.

Alison Rose, Milton Keynes, Bucks

Let s hope all those daft tv property programs will at last come to an end.They paint a dangerously rosey picture of the market and have mislead far too many gullible people.Houses are for living in not trading,
Mike Blunden Wafeord

mike blunden, kingslangley, uk

Banks and Building Societies have filled the shallow end of the swimming pool with enough people, they don't need to entice any more, they're quite happy just to increase the depth of the water instead, and watch from the sidelines.
Don't presume on BOE rates cuts helping the affordability next year, Egg as an example, have already increased the standard variable rate 0.5% to 6.94% in addition to recent rate rises. It is very likely that Lenders will 'pass' rather than 'pass on' these cuts if they happen, they are certainly not gambling material, the odds are stacked against them.

A Jarvis, UK, UK

The property market effectively crashed in August. However you always have a lag phase because vendors don't reduce prices to realistic levels immediately. The lag seems to have been rather longer - three months - than might have been expected. Some few people must still be buying property at near-peak levels. Who are these individuals?

Malcolm McLean, Bradford, UK

Perhaps the most offensive thing about this whole wretched inflated house price business is the efforts of estate agents and lenders, and anyone else who is wealthy as a result of the huge transfers of wealth which have taken place over the last 10 years, to keep the balloon in the air, regardless of the harm it is doing. That is where the gloom really lies, the sheer dishonesty of our government and financial system.

I suppose this is all the result of our lightly regulated capitalist system: speculation, asset bubbles, shifts of money from the poor to the wealthy. We are not as bad as America yet, but it seems our (Labour!) govt wish to make us so.

House prices will surely revert to mean as assets always do eventually. Meanwhile we will have to put up with all the vested interests (i.e. those who have made a killing at the expense of other people) doing whatever they can to delay this.

David, Guildford,

Bank rates may come down but the banks have been increasing their mortgage rates when rates have been steady so will they pass on all of the rate cuts?

Banks such as HBOS have already said they are going to be concentrating on profitability rather than market share (ie Rip-off customers stuck on their variable rates) and some of the other banks would be wise to decrease there exposure to UK mortgages (A&L, B&B etc) as rumours in the city risk turning them into another NR.

I still think the supply and demand argument holds water, esp as those that have over extended will not be willing to sell up for less than they paid unless they have to or are made to, but it will be people competing at reasonable multiples of their salary not 6 or 7 times their salary.

It'll still mean only those with large savings or large incomes will be able to buy anywhere, even as house prices come down.

The supply and demand of too little family homes is one thing.
The over supply of flats is another.

Chris, London, UK

The lenders have long ignored the nationalised BOE they are running businesses, not pandering to the McBroon corporation based somewhere in the City which lashes out taxpayers money on failed companies. Rates will be set at economic figures having regard to the competition and the market forces. A turndown is desperately overdue and as other posters have said, fuelled the so called 'economic miracle' of the last ten disastrous years and bought nu lab. votes.

Victor M., Malaga, Spain

Rate cuts from the BOE wont save the housing market this time even if they are able to make the cuts ( seems unlikley as inflation is above target and rising and set to rise more in 2008) and even if the banks are able to pass those cuts on . Cuts didn't save the market in the 90s in the UK and they aren't now in the US.
The housing market is cyclical , always has been always will be. We are now on the way down and aint nothing going to stop it. Which is excellent news for anyone who wants to buy their first home or trade up.
Housing in the UK in massively over inflated - on a £ per sq metre basis it is 4 times greater than US housing - which is falling. Our house prices are absurd and disguise the fact that our whole economy is built of the sand of house price inflation and debt. The sooner people rememebr to work for a living and make thing that we can sell around the world the better.

Robert, Folkestone, Kent

During WWII there was a shortage of food so the government rationed it so that everyone could eat, not only the rich.

Now we apparently now have a housing shortage but the government does nothing to deter rampant speculation. BTL investment is a major contributing factor to the insane rises in house prices. It is also ruining communities and denying a generation a home they can call their own. To think this is occurring under a Labour government is just sickening.

Government intervention was needed 5 years ago, but they decided to let the good times roll.

I look forward to reading a positively worded headline e.g. "House prices returning to affordable levels"

L Mckay, North Sheilds,

Rate cuts next year? The banks have just said they probably won't pass those on. Risk of a fall in house prices will now be factored in by banks who are strapped for cash anyway.
Demand is not just the desire for a home, it is the ability to pay the price and the banks are having to say No, because there is noone ot there to pass the toxic debt onto anymore.
Demand is therefore falling off a cliff.
If you think rich people with cash will bail out the property think again. They are rich because they are not stupid, they buy low and sell high and that is what they will do in a few years time.

Your best hope is that the government will print loads more money and stoke inflation. But that will save the housing market at the expense of the whole country for decades to come. Best just take your medicine, learn your lesson and move on.

Ian, Esher, Surrey

Why are property prices going up reported as "good news" and going down as "bad news".

Generally, people borrow money, "buy" a house and live in it.

If their house price rises by 200% then the impact is on;

1) The person who sells their house and does not buy another (positive impact)
2) The person who is using property as an investment (positive impact).
3) The person trying to buy their first house (negative impact)
4) The person trying to "climb" the ladder (negative impact).
5) The person who stays put but speculates on the future value of their property by remortgaging. This is gambling, is for the "brave" and the impact is uncertain.

I'd argue that most people in the property market are in positions (3) or (4) and so, consequently, house price rises are a bad thing rather than a good thing as they hurt most people.

It seems to me plain common sense that growth in house prices cannot outstrip growth in wages for very long. It's time for a correction.

Bill, London,

Despite the latest arrogant mutterings from lenders there really is no reason to despair. Yes, house prices have reached a plateau but the simple truth is that demand far outweighs supply and once the BOE issue the first one or two cuts in the interest rate the lenders will have to rethink their strategy. To keep inflation in check the BOE will simply not allow high street lenders to keep their interest rates at a level that suppresses growth. The only real change we will see is those with a poor credit history will find it nigh on impossible to get a mainstream mortgage and this is not a bad thing. Such a high percentage of UK debt is locked up in mortgages that even this government wouldn't allow the situation to get totally out of hand. A stagnant house market and a lack of easy credit? Yes. House prices to drop by 5,10,15,25 %? Don't you believe it.

Paulie, Leicester, UK

Concerning immigration, one of the strong arguments made by the property enthusiasts. Why is that the press only talks about the "immigrants" and fails to mention that 400,000 Britons "emigrate" each year?
http://www.allheadlinenews.com/articles/7009185294
One of the main reported causes of emigration is the obscene cost of housing and services in the UK. These are the true economic forces at work, not the "short housing supply on overcrowded island with high divorce rate" mantra that we had to endure from estate agents for the past 3 years.
The net immigration is still positive, but with the labour market and the pound weakening you can easily see the picture change in 2008.

Michelle, Richmond,

Bring on the housing crash. Property should be for living and not investment. The self interest groups keep saying the market is just leveling off however here in West London prices are falling fast.

Gavin, London,

Zero growth in prices is very optimistic and if it occurs homeowners should be very happy!!!

Simon Gardner, Toronto, Ontario

House prices have risen predominantly because of the free availability of cheap credit, the effects of immigration, shortage of stock etc are overstated- now the banks are going to price credit risk more realistically, the US (and UK) subprime effect could reduce the credit pool by 4000 Billion Dollars- there is a property realignment due in 2008, it will be 20-50% dependent on where you live. Go to propertysnake.co.uk, it's already happening. The pound will also be deflated against the Euro, reinforcing the collapse in Spanish/French markets for 2nd homes, it's a market economy, estate agents still want to sell so the only way is to cut the price, banks will not cut mortgage rates in 2008 even in light of 3 or more central bank rate cuts with rates back below 5 percent.

Dan, Bristol,

A point to Michael Payne - the UK recession in the early 90's came after the last property crash in the UK which started around 1989. This is partly due to how reliant we are on rising house prices to fund consumption which is such a big part of our economy. This house price crash (and I think we have to accept it is here now) will also lead us into recession. The massive influx of immigrants over the last few years (mainly due to European expansion) may well be reversed if there are not the jobs for them to come too. And I'm not aware of immigrants bringing in pots of money to support a deteriorating housing market. Face facts - buy-to-letters have pushed prices higher than they should ever have gone and in today's credit market the numbers don't stack up by a long way. We will see 40% falls by the time this plays itself out over the next few years. And should we be surprised? No. We find it totally acceptable that houses have gone up 300% in the last 10 years.

Richard, Poole, UK

The smart money has sold up already. Pockets of pain are for the sheeple.

bb, Nottingham,

The smark money has already sold up. Pockets of pain are for the sheeple.

bb, Nottingham,

Hands up if you have read a report of this type every year for at least the last five, everyone should have thier hands raised. The only difference between this report and those in past years is that instead of predicting a dramatic fall in prices the Nationwide are predicting 0% growth accross the whole of the UK. If you are in a position where you are renting at the moment and you are waiting for prices to come down, think about how much "dead money" you are paying in rent and then read this report again.

David, Sale, Cheshire

Anil, London, UK,

Please understand that if Banks won't lend money there will be no 90% of income on Mortgages as there will be no mortgages on offer. Many Estate Agents are already in crisis as their lenders are refusing to underwrite their clients. Banks will not keep on losing money. It matters not what anyone street level wants, thinks or does. If the money supply M4 is turned off there will be a severe correction. Compare what the BoE wants and what the Banks are saying. They are in opposition. The BoE does not control Barclay', RBS, or Northern Rock. Look at their mess and you will see the future. In the US they are talking of the UK being as bad as the US during 2008. They can see what is coming as they are in it.

And in a downturn the population explosion will be a catastrophic turn of events the UK will long remember.

GB and TB will be remembered.

Paul, London, Canada

Homeowners have nothing to worry about. Thanks to the present government's policy of uncontrolled immigration, the population of the country is rising so fast that demand will exceed supply for generations to come. People have to live somewhere, and will spend up to 90% of their disposable income on their mortgage repayments if they have to. The only long term risk is if a future government decides to reduce the incredible, unprecedented flow if migrants into the country.

Michael Payne, London, UK

As usual the media is scare-mongering. A zero percent growth forecast is being desribed as impending 'gloom' for homeowners. Anyone remember 1998 or 2003? We had even worse doomsday scenarios for the housing market hitting the front pages but they were immediately followed by periods of strong price growth. I don't understand why credence is still being given to these forecasts when they have proved consisently wrong over the last 10 years.

Anil, London, UK

The binge is coming to an end. For years under Brown the Government has spent and borrowed beyond its means. For years under Brown, the consumer has borrowed and spent beyond his or her means. The crunch is coming and because of Brown's imprudence it will be worse than it might have been - just when public spending could take up the slack, there is no slack in public spending because of Brown's imprudence!

Richard Marriott, Kidderminster, England

Jon Leigh, Southern, France - you got it spot on.

The Bank Of England, is trying to talk up the market, so that it doesn't have to reduce interest rates.
The reality is that inflation is going to be higher than their target, and they will have to raise rates to keep inflation inder control, which will reduce house prices even further.

JM

JM, manchester,

The BoE must cut fast and deep if we are to avoid a catastrophic fall in consumption. The all-important sentiment of the overburdened consumer is on a knifehedge. The value of his/her prime asset has stopped growing and may actually fall. Without the cushioning support of monetary easing, the massive UK personal debt will unravel into a vicious recessionary spiral which will not even spare the gloaters. Maybe it's too late already. The BoE have been warned.

Peter, Lincoln,

It's astonishing and irrresponsible of the BoE to say that interest rate cuts are very likely next year, raisng false hopes for millions when the reverse could well happen as its main target, inflation is soaring...

cww, suffolk,

All houses are so over priced a drop is what is needed. The actual cost of building a house is very low compared to the actual sale price. Its about time the big building companies started making less money and paying less for the land. All of the profit in property is only paper money as you always need somewhere to live. The losers are the btl people but if they are shrewd they will be in for the long haul and still make money.

Lets get back to buying an affordable house and just enjoy living in it instead of worrying about prices going up and down and how much you can re-mortgage to buy other luxuries and getting further into debt.

Mick, Gold Coast, Australia

The property market is already in crash mode. Who knows how far prices have fallen, nearly all sellers are refusing to reduce their asking prices to sell so houses are simply going unsold instead. Houses are priced in yesterdays credit markets and not todays so they are now totally out of whack with what people can actually borrow to buy. Whilst most people will see this as bad news I can only welcome the news of falling prices for myself and on behalf of my generation, that we might now have a chance to afford more than just a small 1-bed flat to bring up a family in.

Richard, Poole, UK

Enough spin by the media with the So called "house price fall" Could someone remind us of the house price predictions this time last year, Without the credit crunch issues in the US would we be reading these same stories.

Fred, London, UK

Hurray, this should have happened 5 years ago. This would have avoided the unnecessay need for a correction now.

Tom Burleigh, seaford, EAST SUSSEX

How come the article predicts the supposed coming slump in prices as gloom.
To a lot of people it will possibly mean being able to afford a house.
Also, perhaps it will lead (although I doubt it) to people starting to regard a house as a place to live rather than a money making opportunity!

Pete, St Albans, England

The enormous balloon, which has been inflating unsustainably for the past half dozen years and is almost completely responsible for the mirage of 'economic stability' in the UK, is bursting.

It had to happen sometime.

It will soon become very apparent that an economy built on £1.4 Trillion of debt, where nothing is made and everything (including even food) is imported, is not a 'stable' economy at all.

What a mess.

Jon Leigh, Southern, France

It is time the lenders were nationalised. They are unable to behave responsibly, as the Northern Rock has shown and others are about to show, and now have reached a point of such arrogance that they feel able to defy the Bank of England's rate cuts and say they will not follow with cuts of their own. They are out of control and need to be brought back in. Sharply.

eric campbell, harrogate , uk

The bank has already hinted of interest rate cuts next year. As long as demand outstrips supply, the estate agents will have a field day.

Hamad Lone, London, England

Keep a close watch on inflation. Higher inflation will mean higher interest rates regardless of what the position is and what the BOE are saying. For those who dont know inflation is the main destroyer of any economy. Look at the extreme example of Zimbabwe..1000%+inflation.

Des, Birmingham, UK

As a young professional trying to get onto the housing ladder I could only welcome a fall in prices. There is a vast gap in wealth between older and younger generations now, and I believe that this will hit consumer spending and the wider economy in the future as people put more and more of their income into their property and have less and less to spend elsewhere.

Jonathan Turner, London, England