If you go up and down Lavender Hill and Northcote Road in SW11, you will see very few estate agents with activity of any sort. The best indicator is the number of "slaves" in a given Foxtons from 5-7 in the evening (ie the main visiting hours) - the one on Lavender Hill is completely empty right now - two other estate agents are "going through refurbishment" and another one is being bought out and is "temporarily closed". The upshot is that asking prices are not falling that rapidly, but volumes are falling dramatically, leading to fast-falling revenue at estate agents. The next step is for asking prices to fall in line with reality, but for that you need forced sellers and for that you need rising unemployment or mortgage rates (by more than 2%).

Agree with "alan" that the young only support the market if parents give them the money. Problem is parents view housing wealth as "earnt" and therefore they are spending the kids inheritance in many cases and/or protecting their pensions.

John McDuff, London, UK

While the overall correction is welcome, justified and inevitable, it's not going to affect the whole country! London and Edinburgh (possibly Glasgow as well) are going to at least level off or keep growing simply due to demand overweighing supply, especially from overseas.

Michael, Edinburgh,

There is a finacial term called the 'carry trade', where you borrow in cheap currencies and invest elsewhere. It has a notorious whip-back. The government's stealth pensions prop - restricting supply to discreetly move wealth from the young to the old - will whip round quickly when the imminent demographic crash comes. You can't downsize if there are no buyers and you can't retire without your nest egg.

There will be no buyers partly for demograhic reasons but also because they will be renters and therefore have no nest egg of their own to trade up. This is why the seriously rich are staying in buy to let and slowly re-creating Britain's Victorian property profile of fewer, larger landlords, which still exists in many European states and was only replaced here with the arrival of the Welfare State.

alan, london,

Clive, Chichester: That argument assumes rented and bought accommodation to be thought of as good substitutes, and in doing so ignores the effect of Thatcherism on the British psyche.

Neel, London,

Jack, London:
I'm afraid it's you who hasn't thought it through. You say that houses will be more affordable because lots of people will inherit "equity".
Right, and if they want to cash in that equity (to buy another property for instance), they will have to sell. And realising there "equity" depends on a buyer. Somewhere at the bottom of any chain has to be a First Time Buyer providing the new cash.
But if the FTB can't get a mortgage, your hypothetical beneficiaries will find they've inherited rather less "equity" than they thought!
This crash is going to be spectacular.

Dylan, Rossendale,

Another very interesting bout of crystal ball gazing. Its amazing how many people 'know' that, for example, house prices will crash by N%. I wish I has a crystal ball as good as theirs, I would be very rich indeed.

Alan, Bath, UK

With all due respect Dr Hamnett I found your article simplistic and i'm not even sure the information regarding the drops associated with the early 90's (more than 33%) is even wholly accurate & no doubt a worst case scenario not shared by the country at large. You are undoubtedly an expert on housing wealth & I’m not suggesting you dont understand the complexities involved but many different factors are driving the housing market forward. There seems an assumption in your article that each person must strive to achieve their house from zero and that all generations are equal. But surely more money is coming into the economy each year and ultimately passes to the next generation, not destroyed upon someone’s death. Each generation’s affordability will increase IF their parents owned property. I dont deny a divide is occurring between those who can/those who cant, but u must agree the market does not care whether everybody can afford a house, merely that there are enough who can

jack, London,

The coming recession will mean Buy To Let landlords will sell because they rely on equity increases not rental returns for growth. Recession and a collapsing pound will mean immigrants go home and unemployment will rise so there will be fewer renters to boot. (It may not be rising yet, officially, but it is a lagging indicator).

Moreover, the Credit Crunch will mean mortgage lenders will be reluctant to lend and keen to take back rapidly depreciating assets to sell them asap before prices plunge further.

Already, swathes of new city centre flats owned by developers are empty and plummeting in price. And Gordon Brown has pledged three million new homes. Under-supply? I think not.

Coming stagflation will mean little chance of cutting interest rates and massive government debt means no scope for tax cuts. Public and private sector job cuts mean more properties on the market. Food, fuel and tax are rising at mega levels and cheap borrowing is over. The property binge is over.

Sunny Jim, Lorient,

Neel, London. I'm always amazed at how many people fall for this estate agent perpetuated demand/supply myth. It should be obvious to anyone with even a basic grasp of economics that there is no supply problem - if there were rents would have rocketed along with house prices - they haven't. Even more tellingly rents have remained stable even with the influx of migrant workers, suggesting earlier oversupply rather than under supply. Property prices have balloooned because of a speculative bubble and will collapse just as quickly once people lose faith in the notion of ever increasing prices. What's more, the bust will be deeper and longer than you might expect because migrant workers will leave once the economic downturn hits and the government's building programme WILL cause oversupply. All those BTL pensions due to be cashed in in the next decade or two may well prove to be major lossmaking white elephants.

Clive, Chichester, UK

adam smith said if a price stays high, something fishy is going on. well there is 700, 000 empty homes (some dilapedated) and 5 million renting. the fact is there are too many wealthy people who use homes as assets. the prices rose because women wanted to work too, but it went up too high because of the 'nest egg' culture of idiots.

Along with Sipps trying to lock wealthy people in to the market (my view), then gordon brown somehow 'forgot' of the 'loophole' that he created on purpose, meant loads of rich people bought and these 'assets' are gonna go on the market crashing the whole thing. Especially if we go into recession, then wallop crash.

thanks god, people are coming to their senses that young people should own their property. we are going to be top heavy with old biddies in this country and we aren't going to help them if our lives are based around owning a patch of land instead of being economically forced to rent.

mark, bradford,

MR W Jones, Liverpool. Peculiar logic! I can't afford to move because prices at the next tier are far too high - an extra bedroom will cost about 150k, which I refuse to pay. People will only be able to afford to move again when prices come down - high prices only benefit investors and those who are downsizing. As for negative equity and selling up, the BTL investors will take care of this - if you are losing profit there is every incentive to sell, especially when crash gordon's new CGT breaks kick in in April (better hurry, how long before a U turn on this?). Economic trends are decided at the margins and so it will only take a few BTL investors to bring the whole house of cards crashing down.

George, Brighton, UK

At last, an article that dispels the myth that rising house prices are a good thing. MB, for Edinburgh sums it up well.
But might I suggest to those who feel there's a genuine shortage that you check a few property websites to see the amount of homes currently for sale, particularly 'chain free' - you'll notice that there are plenty, they're just unaffordable. Have you not read about the glut of new-builds in city centres? The Buy to Let brigade are dumping their stocks and the supply/demand argument is fading fast.
Also, Mr Jones suggests prices will just shoot back up again as demand increases - and that "no one can afford to move till they go back up again." How, if they're unaffordable now, will they become more affordable with price rises?! The mind boggles. Perhaps Mr Jones doesn't remember the last crash when the same 'supply & demand' argument was trotted out and all property bulls were claiming 'it's different this time...'
It is. This crash will be a lot bigger.

CP, London, UK

Mark, you clearly aren't aware that there is more to geography than learning the capital cities of Europe, or the formation of the white cliffs of Dover. Keep up son, education has moved on and this wouldn't have been too out of place on the syllabus 25 years ago.

Harry, Glasgow, UK

Supply demand, small island blah blah
Please google Japanese House Price Crash

Andy, Cambs, UK

Mr Jones is right. I remember trying to buy a flat in the early 90's. Despite the drop in prices no one would sell...

Then a flat might be priced at £70K but actually worth £60K. The owner might well have a mortgage of £65K - rather than sell at £60K and take the loss - they grimly held on and on while the debts mounted and would eventually hand the keys back to Building Society.

They wouldn't sell at the £60K and I couldn't buy at the 70K (even if I'd wanted to) because you couldn't get a mortgage for the over valued price.

The only people who won were the ones who had the cash to buy at auctions...

Jeremy H, London,

The author has missed a key point. In the current market the first time buyer has been replaced by the buy to let investor, so the lack of first time buyers does not matter so much, especially in London.

I also wish that articles would stop generalising. The market is not a single entity. House prices in parts of London are still rising due to the increasing population and this has no relation to what happens to house prices in Newcastle, Birmingham or the rest of the country.

Sanjay Mazumder, London, UK

Its nice to see house price falls talked about in a positive light. There is nothing justifying 10 times salary to buy the average house, its just pure speculation rather than substance. Maybe one day I can afford to buy my first property if prices continue to fall. Till then I will keep on saving deposit with hope.

Gavin, London,

Professor of Geography at Kings College gives his views on the property market? Tomorrow a plumber will discuss the turmoil in the markets

Mark Connelly, surbiton, surrey

Hip, Hip Hip, Hurray. Three hearty cheers for falling (house price) inflation. The Bank of England should be pleased that their core mandate is now being fulfilled.

anthony, london, england

Yes but is any one with negative equitity actually going to sell you there home?

There answer is no me thinks, all that will happen is prices will go back up again, as demand incresse when there is no sudden glut of homes on the market becuse no one can afford to move till they go back up again.

MR W Jones, Liverpool,

There is some comfort for those who rent and wait.
But our poplation is growing and our island is small. This means that there is a steady growth in demand. The current correction should be short lived.
So 'gather ye rosebuds while ye may'.
Edward
Somerset

Edward Jones, South Petherton, Somerset

There'll never be the sort of correction that some are expecting, for the simple reason that demand still greatly outstrips supply. As well as the upturn in immigration since 2004, there's the fact that people are living longer and increasingly living alone.

Neel, London,

The bubble is about to burst, but will it deflate enough? Current prices need to drop about 50% for the average earner to comfortable afford to get onto the property ladder, this however would leave a large amount of current owners with huge negative equity for years to come. The only winners in a property boom are bankers and property developers, for whom the home-owner has to carry-the-can.

Les, Southport, England

Well it's good to see that someone's finally waking up to the reality of the house price boom / con that has gripped the UK for the last 5+ years. Anyone with a passing knowledge of economics could see the boom could only end in tears eventually but why did it take this long for the media to start seeing sense?

MB, Edinburgh,