House prices could fall…

It’s true. No argument, house prices could fall. They could also, it need be said, continue to rise. This isn’t about predictions, but about understanding the risk. I was moved to blog about this again (see past blog) having been reading through some forum entries which effectively say “house prices can only ever go up.” We’re in an age where media and especially TV property programmes pump the home ownership dream, but often this misses the financial reality. It simply isn’t true, house prices are a risk-based asset class just like shares, and while the swings tend not to be as wide or as rapid as the stock market, they can, and do, and at some point in the future will happen.

When that will happen no one knows… 1 month, 6 months, 1 year, 10 years or, 20 years. Yes no one knows – many will opine one way or the other, but the only real certainty is there isn’t any certainty. Anyone who tells you they know definitively what will happen is lying. Of course speculation and argument about moves are important to consider, but always remember they are only that.

Let’s make this plain. Owning a house is great, but no necessity. If you’re buying a house to live in, the fact you won’t need to pay rent really does help the equation. Yet there’s no need to starve to do it. Your overall finances are more important, make sure you can afford the house and definitely don’t overstretch yourself – if you think it may be a little much, take a step back and pause, don’t hurt yourself to get a house. Better to wait a little until you’re secure.

Remember renting isn’t a crime. Of course in the perceived market where house prices constantly rise, renting is a disaster, but if house prices plummet, the renters would’ve been right. And no one knows what the future holds.

If you’re still unconvinced or perhaps using the “yes, house prices may drop but Hampstead/Wilmslow/Hull (delete as applies to you) never drops” then think again. I remember the talk about shares during the year 2000, when it was said “there won’t be a collapse in internet shares, the market has had a fundamental shift and revaluation”, but we all remember the dot com crash. Property just isn’t as safe as houses.

Now I’m not suggesting anyone panic or sell. Just that you don’t make decisions believing that having a home is the be-all and end-all. There’s no prediction of a crash, a fall, or even a flatline, just that when planning your finances you should take this possibility into account.

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