Are house prices really falling?

A report by an economic consultancy has said that houses are substantially overvalued and that there will be a sharp "correction" which could trigger a recession in the UK.

Capital Economics warned that prices are expected to fall by as much as 30% over the next few years,

They could drop by 5% in 2004 and a further 10% in 2005.

The overheated housing market has prompted ratings agency Standard & Poor's to put the UK on its list of countries where banks face the prospect of rising bad loans.

House prices have already begun to fall in central London according to estate agent Hamptons, and that could mean that prices will start falling in the rest of the country.

Do you agree with Capital Economics? Are house prices falling? Is your home still the safest investment you could make?

This debate is now closed. Read a selection of your comments below.

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Your reaction

A house or a flat should be looked upon as a home, and a home is one of the basic of human needs. The problem here is that this Government, and many of this country's citizens see a house as an opportunity or tool to make easy money. Until this attitude changes the problem will never go away. It is a vicious circle of booms and crashes that leaves a minority with large profits but a majority with screwed up lives and debts that will take years to pay off. There are decent families in this country who are still, to this day, counting the cost of their misfortune from the last slump of the early nineties. The Government should have learnt from that but its plainly obvious the are content to let it happen all over again.
Neil, UK

I've been looking into buying a flat and seen the prices start to slip here in Central London. That said, they are still tremendously overvalued - but the fact that people are waking up to this, coupled with the relatively cheap rental market, will force the prices down - no doubt until they are just plain expensive.
Phil, UK

The property cycle will prevail sooner or later, property prices will fall sharply and 80% of people will get caught out - just like they always have. 20% will be lucky or prudent investors. Which category are you in?
Ian, UK

Current warnings are to create artificial panic to slow down the house prices in London and the south east

Shabbir Gheewalla, UK

In real terms house price would keep on rising at around 10% per year with its upwards and downwards ride in the circle of 10 year cycle. Current warnings are to create artificial panic to slow down the house prices in London and the south east. The fact is Bank of England needs to cut its base rate for our industry to remain competitive compare to USA and Japan, they can't do it because it would allow house prices to go through the roof and thus this artificial panic. If you buy your house to live in, than you must not get panicked at all.
Shabbir Gheewalla, UK

In the village in which I live a brown-field site has recently been developed into housing. This has a mixture of 2,3,4 and 5 bedroom houses. Prices have been ranging from £180k to £450k. First-time buyers cannot afford to step onto the property ladder with prices at this level. This will inevitably lead to a drop in house prices as these people are priced out of the market, preventing other people from moving up. It was recently reported that the average house price in London is now £200k - I live in Gloucestershire and I'd happily settle for a price as low as this! The market has gone mad.
Chris Elmes, UK

I don't understand why people are even allowed to borrow to the hilt, as most couples used to be able to survive if one lost their job, this is almost impossible now. Couples with only one income had better face up to the fact that they will not be able to meet payments, and first time buyers like myself should just sit tight, our time will come!
Anthony Collins, UK

There are not enough houses available

Nicola, UK

The problem with the housing market is simple. There are not enough houses available to supply the demand at present which has led to spiralling prices. The reduced interest rates have helped but not caused this to happen. The demand for housing will not suddenly disappear. People will still leave home, still get married, still get divorced etc.
Nicola, UK

Deja vu? Wasn't everyone saying the same thing last year? Low unemployment, low interest rates and easy credit, you do the maths. Father Christmas can bring a lot of things but a housing crash he won't.
Simon, UK

We have been trying to sell our house since August - average area, average house in the South East. We have been told to drop the price twice now by the estate agent, as properties are not selling. This will eventually work its way through to the figures released by the mortgage companies, though our estate agent said not to rely on those to much.
Phil, UK

Of course the prices will fall

Alistair, England

Why do people insist on calling buying a house an 'investment'. It only encourages people to buy and wait in expectation for the value to soar as is happening now. Of course the prices will fall after all the 'doom and gloom' forecasts that keep getting published!!
Alistair, England

UK house prices have risen at an incredible rate, meaning that ordinary people have managed to dramatically increase their savings with little effort other than foresight. The downside is that young families now find it almost impossible to get on the property ladder. The government should act swiftly to make sure that a recession is not triggered. If it acts now, it has time on its side because there are parts of the country where prices are still rising.
Alex Swallow, England

I suspect that all that is happening is that the price speculation that has been creeping into the market, and therefore pushing the prices artificially high, is now being taken out of the market.
Howard, UK

I don't see how house prices can fall

Helen, UK

As a young person who has no idea how I will ever be able to afford a house, I would welcome a drop in house prices. However, I don't see how house prices can fall until some serious house building takes place to correct the current housing shortage which makes for artificially high prices.
Helen, UK

House prices in central areas of London (within or near the charging zone) have been falling for quite some time from personal experience and watching the prices in the press and at estate agents. We bought a flat a month ago at 12% less than the original asking price which was itself already discounted from its high in mid-2001.
Mark, London, UK

We've been hearing talk in the media about a property crash for ages and it never materialises. It is just scaremongering.
Peter Causton, UK

House prices can, and will, remain high

ML, UK

The fact is that there is a massive housing shortage, and that first-time buyers are no longer required to support the market. House prices can, and will, remain high. Once on the property ladder, the cost of housing is largely irrelevant anyway.
ML, UK

I've been anticipating a localised housing crash for two or three years, and each year it rises higher the worse I expect it to be. This boom is different to the last one, in that it is much more localised to London and the South East. The fall can't come soon enough for this first time buyer, the only way I can raise the deposit is through my redundancy payout, but then I have to get another job first!
Christopher Cook, Surrey, UK

It's about time they fell, I can't afford to get on the market as a first time buyer at the age of 24 and I'm living in Ipswich and earning more than the national average salary! There must be thousands of wannabe first time buyers like me and if they can't afford it either the market is bound to start falling to bring prices back into line. People who did buy at the right time are starting to get too greedy and they need to get out now before it really goes, otherwise millions could end up in negative equity all over again.
Alex, UK

The current price level means that people simply cannot afford (or like me are unwilling) to purchase their first home. Without the demand, if people wish to sell, then they have to lower their price. The more we wait, the greater the fall (I hope!)
Rob Hather, UK

Here in Amsterdam the property prices were rising sharply for a good few years, in the same way they are in the UK, and especially London. The price rises suddenly peaked at the beginning of this year, and now prices are dropping more severely than they were rising this time last year, with the result that my own home is already worth 10-20% less than it was just one year ago. Great if we were planning to sell up one day and buy another property in the Netherlands, but we'll only sell when we're ready to leave the country.
Jennifer, Netherlands

The housing market has risen to the point where talk of a collapse surely has to be a self-fulfilling prophecy. Many people can't afford to get into the market at all. Many of those with equity can't afford the next step up and stay out of the market. Anyone who can afford to buy the house they want will naturally expect to do so at the lowest price if they are told the market will fall. Result, the market falls.
Ian W, UK

I've suspected house prices will crash for the last year or so... I've been waiting for the bargains to appear. A property crash will move the speculators and investors out of the market and free up homes for those with a little bit of foresight who decided to wait. People who buy houses in the current market are like people who bought dotcom shares in early 2000. A fool and his money are easily parted.
Mart, UK

Houses are clearly overvalued for first time buyers since it is taking increasingly large income multiples to get on the ladder. But for existing home owners rises and falls in value are almost irrelevant anyway since all values are relative and a fall in the value of your home will be matched by a fall in the value of everywhere else.
Daniel Keating, England