Most people believe housing market is stable

Surprisingly enough, the prices of British houses aren’t falling through the floor, despite the tough economic clime, poor levels of property transactions, sustained inaffordability, restricted lending and an employment outlook that can be described at best as bleak. The reason for this, according to a new survey, is blind faith.

Rightmove have quizzed 25,000 people who visited their site, presumably these are prospective buyers or sellers, and asked for their predictions for how property prices would change on the short-medium term. Despite the daily headlines that describe the great economic waves that are battering the housing market, less that a third felt that the prices would drop next year, and 63% said they would rise or at least hold their value.

Even Miles Shipside, the director of Rightmove, is a man who spends his days examining the three way relationship between us Brits, our money and our property, seems bemused by the belief the public holds that the value of bricks and mortar will defy the ever deteriorating situation of the economy.

He said that we need to remember that despite the overall confidence this survey has revealed, the volume of transactions are way down on what we consider the norm. Economic stability is needed both in the eurozone and the UK before many are able, or willing, to engage with the UK property market.

According to Zoopla, as well as transactions being way down, the gap between the inflated asking price and the amount of cash that changing hands has risen to a record high of £19,500. It all boils down to the fact that if the home owning/buying British public are determined to believe that within the property market it is very much business as usual, the banks, for the time being at least, are happy to play along.

After 33 months, the bank base rate of 0.5% is beginning to feel normal, and this is dangerous when you consider that over the past 40 years, it has been demonstrated to such a degree that this isn’t reality. Between 1973-1991 there wasn’t one year that there wasn’t a base rate in double figures, and between June 1978-September 1982 the base rate never fell below 10%.

Up until the autumn of 2008 the base rates reflected what so many economists still consider as unremarkable, as they stuck around 5%. To coincide with the Rightmove Consumer Price Forecast, and to reinforce the interest rate threat, the financial stability report from the Bank of England contained data that suggested, despite pretend interest rates, it was only the leniency of the lender that was keeping many properties within the hands of its owners.