I'll stop housing boom for good, promises minister as experts warn of 6% house price falls

Published 03rd Jan 2011

Britain's property boom could be over for good, the housing ­minister said last night – as experts warned prices could fall by 6 per cent this year.

Grant Shapps said homeowners should no longer rely on their houses to fund their retirement.

He said ministers were hoping to engineer an era of ‘house price ­stability’ in which property values would gradually be eroded by ­rising earnings.

He suggested that in a ‘rational’ market, house prices might rise by 2 per cent while earnings rose by 4 per cent, making property more affordable over time.

The Government is trying to encourage councils and developers to build more homes to suppress the market and make it easier for first-time buyers to get on to the housing ladder.

Mr Shapps, a Conservative, said a fall in the real value of houses would ease the ‘horrendous’ situation faced by millions of young people.

He said property should ‘primarily be thought of as a place to be your home’ rather than as an investment.

‘I think it is horrendous that a first-time buyer would need to be 36 on average if they do not have the support of Mum and Dad,’ he said.

‘The main thing everyone requires for their subsistence is a roof over their head and when that basic human need becomes too ­expensive for average citizens to afford, something is out of kilter.

‘I think the answer is house-price stability. We had this crazy period from 1997 to 2007 when house prices almost tripled, which is fine if you had a house.’

His stark message is likely to frustrate many middle-class families who have increasingly relied on property following the failure of other pension investments. It also risks leaving him open to charges of hypocrisy as he has ­previously proved an astute ­operator in the housing market.

He pocketed an estimated £250,000 from one house sale and could make a similar amount if he sold his five-bedroom detached house in Hertfordshire, whichis worth more than £1million. ­

Economist Howard Archer said house prices could fall by as much as 6 per cent in 2011 as rising ­unemployment and the continuing mortgage drought take their toll.

But he said the British obsession with housing was unlikely to change unless ministers took dramatic action.

He said the continuing shortage of property was likely to see prices rise in the long term.

Mr Archer, of the forecasting firm Global Insight, said: I really cannot see the situation changing significantly in the UK – there is very much a home-owning psychology in the UK. And over an extended period of time, house prices do tend to rise so it has long been perceived better to buy than to rent if you can.

‘I just cannot see that view changing unless house prices stay flat or even fall for an extended period.’

Source: ' This is Money '

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