Are House Prices Fair Yet?

The Financial Times asked a group of economists if they thought house prices were fair and the answers are pretty interesting. Although the concensus is that house prices are NOT fair, the reason that crops up again and again isn’t quite what I expected.

Factors like low interest rates and easy credit are blamed for facilitating the vast rise in prices over the last decade, and many of the economists juxtapose this against the unaffordability of houses. Even if you can get a mortgage many times your salary, that still means that your debt is disproportionate to what you earn.

It’s not easy credit that takes the prize for causing huge house prices however. It’s demand. High demand and lack of housing stock is the root cause of inflated prices according to the economists, and this is something that won’t be rectified in the short term. Remember what I said yesterday about all those new flats being built that nobody wants? Well, if they’d been houses or family homes, they might have gone some way towards solving the problem.