Fall in House Prices Welcomed?

12 May 2008

More people want house prices to fall than to rise, BBC research has found.

That is the surprise finding of the first poll to test the assumption that house price falls are unpopular and therefore politically damaging. Barely a fifth of people want house prices to rise - fewer than the number of people who want them to fall.

The poll of 1,005 people, commissioned by the BBC, found that only 22% said they wanted prices to go up while 28% said they wanted house prices to fall.

The poll, carried out by ICM, canvassed people over a three-day period from 25 to 27 April.

'Crashproof'

Nearly half of the people who responded, or 46%, said they wanted them to stay the same. The findings cast doubt on whether the political and economic damage done by falling prices is as serious as has been feared.

Price falls bring economic benefits not just to first-time buyers but to any homeowner who wants to trade up to a larger or more valuable property.

The price of the place they are selling may fall but all else being equal, the more valuable property they want to buy will fall by a larger amount - meaning they have to borrow less to "climb" the property ladder.

Confidence knocked?

Economists are concerned that if prices fall too quickly it may knock consumer confidence, already at its lowest for 15 years, leading to reduced spending that could worsen the current economic slowdown.

Respondents were asked if a fall in house prices of more than 10% would make them more likely to cut back on household spending such as clothes, leisure and groceries.

More than 60% of people said it would either make no difference or would make them likely to spend more.

Only a minority - 38% - said it would make them more likely to cut back.

Nearly a third of homeowners have no mortgage on their homes - meaning no risk of negative equity.

Source: BBC