| > Simple supply and demand dynamics are not at work here. It depends on your definition of "simple". I certainly don't think it's possible to relate prices directly to shortage of supply, because things are not that simple. I also note that, because so many overseas buyers want UK properties, demand is essentially infinite. This decouples prices from the local buyers' ability to pay. > I'm sure there was a crisis not so long ago where lots of people were betting on house prices continuing to go up for the foreseeable future which didn't end too well. It didn't end too well for some people who were forced to sell, for whatever reason. But the vast majority of home owners just sat tight and waited for prices to recover. They did. And so far, they always have. There are obviously going to be local variations due to external events -- floods, factory closures, gentrification and thousands of other things. However, the overall trend is clear. > Maybe, just maybe, the problem is too many people thinking of housing as an investment? Maybe, just maybe, the problem is that they are absolutely correct to think that way. As you point out, if you bought a house in 2000, you've doubled your money and saved a lot on rent, and with very little risk. With interest rates at current levels, where else can you get that sort of deal? (Serious question if you have a serious answer. My shares and savings haven't beaten inflation.) |