Alaric wrote:Tara wrote:A fall in UK house prices of about 40% in real terms over the next few years will be needed to bring the multiple back to a more reasonable 4x or 5x average earnings.
Between, say, 1989 and 1992 prices dropped by something like 25% to 30% in money terms and didn't start moving again until New Labour after 1997. Personally I think the mandate for managing interest rates and inflation given to the Bankk of England missed a trick. Namely it should also have targeted inflation in the price of land and housing with a view to keeping the relationships between age, salary and house purchase affordability at a consistent level. But perhaps the perceived need to cut interest rates towards zero following the banking crises of 2007-2008 would have scuppered this.
That of course is maybe only true with UK averages, parts of the UK behaved very differently.
I bought my first Edinburgh flat for £50,000 in August 1989 and sold it for £74,500 in September 1997. Traditionally Edinburgh pricing never got as frothy as London/South East and effects generally took a while to reach us and diminished by distance, like ripples where a stone is dropped in a pond.