Broad Oak: your emotional support animal

Saturday, June 13, 2009

Why I think house prices must continue to fall

The West doesn't save enough and has borrowed too much, so it's going to be a moneylender's market. So, either:
  • Interest rates go up, to make it worthwhile for lenders to continue financing us. This will cut into take-home pay and make it more difficult to service large mortgages. House prices will drop, and so, eventually, will rents.
However, high interest rates will be very painful. The other way is:
  • The government will continue pumping cash into the system, one way or another. Our currency will depreciate further. Imports will become more expensive - and we import essentials like food and fuel. Since we have let our industries wither, we cannot quickly turn to providing for our own needs. So prices will soar and remain high for a long time. This will cut into take-home pay and make it more difficult to service large mortgages. House prices will drop, and so, eventually, will rents.

"Eventually" is happening now, as it happens. We were looking for a place to rent, found one on the Internet at £595/month, looked round it last week and the agent handed us a details sheet with the asking rent: £450.

No comments: