House prices are still hugely inflated and it's going to take a long time before new couples salaries will get to the level where they can afford a home, without having to rely on contributins from their parents.

The other day I bought a tube of rowntrees fruit pastilles in a newsagent/convenience store and was charged 55p, I think this price was a little inflated but nevertheless I worked it out that this was 11 shillings in old money (I was born 1960) and that it cost exactly 22 times more than the tube I could have bought in the 60's for 6d (2 1/2p). The average house in the 60's cost below £2000 I would be really pleased to buy an average house now for £44,000 using the same inflation example.

Try the above formula with virtually any other commodity as follows
22x £647 (1960's Mini or other small car) = £14234 (you can buy small cars cheaper now) etc etc.

House prices are out of control and have been for many years, they are fuelled by greedy irresponsible lenders, and government interference in local planning which restricts the amount of affordable building land.

Has anybody considered why house prices have risen so much over the last 50 years or so? As Chleo reports, her grandparents viewed a house at £2k and deemed it too expensive, it may have been that the house was overinflated in price at that time for what it was, but the owners were not bothered whether they sold it or not, so negotiation was not an option, hence the price stood until somebody eventually paid the asking price.
Which leads me to beleive that house price rises are the combination of higher asking prices year on year met by eager buyers and easily available funding, when a bank like Northern Rock consider it not a risk to lend 125% on a property who would walk away from the ease of owning something that is over priced.
When I applied for my first motgage some 35 years ago the criteria for lending was set against the backdrop of a property possibly increasing in value by 125% or an average of 5% a year over the duration of the mortgage with the lending based on a simple calculation of less then 2 x joint income, now look at it! House price over inflation has been fueled by the greed of the lending institutions and the acceptance of higher debt by the borrowers, too many people prepared and able to pay extortionate prices for a home. Will it ever be corrected and controlled? No! as soon as loans and motgages are freely available it will all start again, but beware, these lending rates are designed to get you roped in, higher interest rates and taxes have to be applied in the near future in order to pay for the damage caused by the past. Buyers need to do the same as your grandparents did, buy within their affordability.

Things changed when women, quite rightly, changed their role in society.  We wanted to go to work, have children, homes and everything that came with it.  Good on us we've achieved much since the 50's.  You can't have it all ways, everything shifted with the event of working women and dual incomes.  Couldn't be helped but im sure we'd rather have things this way?!

I dont think it is the rising house prices that is the problem, the higher deposit is what prevents 1st time buyers getting on the property ladder.  If this is lowered the housing market will pick up, banks should concentrate on the applicants ability to keep up payments, rather than if they can afford a deposit, they could possibly go into debt raising the deposit which could lead them into difficulties later when they are trying to keep up the mortgage payments.  If they lowered it to a reasonable rate between 10% - 12% then this would kick start the sale of lower priced houses, giving young people a chance to have a life of their own, and not have to reside with their ageing parents.

Im not a financial expert by any means but have tried to follow the curernt situation the best I can...

The bottom line is that house prices are massively over inflated and need to be allowed to correct themselves as they did in the 90's back to affordable levels. The government needs to stop trying to keep the bubble inflated and let nature take its cause. A combination of people wanting everything NOW on massive credit and irresponsible lending through greed has left us in this mess, money is essentially debt when you appreciate how it is actually produced! After graduating in 2005 there was absolutely no way I could afford a property, student debt and no deposit meant I had no option but to either move back to my parent or rent. I decided to move back to my parents, start my career, repay debt and start saving. A few years later, my girlfriend and I started looking at properties and I was disgusted at the levels that we were offered. Lending at 5x joint income was one offer, how is that sustainable? What happens when we decided we want to start a family and need one of us to stay at home/work part time and raise the family whilst still affording to service this massive debt. But if we didnt take these ridiculous levels of funding then there was no way we could afford anything let alone a single bed shoe box! Lending criteria needs to get back to sensible levels of 3x annual salary MAX and stay that way (perhaps it is that now - but im renting now and saving a deposit so I dont keep up too much on mortgage deals). That will dictate levels of house prices as it always has. For me it gives and indication on which way house prices are heading over the next few years when banks are asking for larger deposits, they wont take the financial risk of the negative equity and want you to lose that from your initial deposit. In my opinion, higher house prices are designed to benefit two groups, the government and the banks. And how can house prices be sustained with continuously rising levels of unemployment. With people coming off low rate variable rate mortgages, potential public service cuts, potential intrest rate rises, poor mortgage availability, high unemployment were in for a very bumpy ride over the next few years. I'll happily carry on renting and saving for the next few years so in the long term were not overstretched and can enjoy our hard work later in life and not be saddled with crazy levels of debt, or so I hope. Maybe Gordon has something else in store for me............

I disagree with the argument that house prices are unaffordable, people are just not willing to work their way up.

There seems to be this expectation that you no longer need to start small and build up over the years.  My parents started in a tiny mid terrace when they got married and built up over the years to the 3 bed detached they have now.  Its not massive but its been the family home for over 20 years.

I've recently bought a property for £105k as a single guy, with a deposit of 15%.  I'm 31, and have been saving towards that deposit since I got my first job at 16.  I earn OK money, nothing outstanding (approx £24k with overtime) and like Jonathan was disgusted with prices and the debt I needed to put myself in while I've been watching the market over the last few years.  It's not my ideal home but it's a 3 bed in a nice area, and is big enough to raise a family in without moving.  Admittedly I'm wiped out financially now but I think the years without holidays abroad or fancy cars for the last few years is worth it in the long run.  People may disagree but I knew I wanted a house, and I knew it wouldn't be easy and it needed sacrifice on my part to achieve.

I sympathise with people who aren't as lucky as me, but I don't think the market will go down much further.  While ever market forces are in play, and there are people willing to pay the prices the prices will stabilise, then increase as supply dries.  Unfortunately the only way I can see prices dropping further is for there to be a glut into the market, such as large scale repossessions, and the Government would have to step in to prevent it as social housing is already in short supply.  

Just realised I've been rambling, sorry.  

There is also the factor of Supply and Demand.  Supply of over priced houses you will find on every property website.  Supply of sensible or cheap house you will never find, why ?  Because the estate agents sell them off to pally pally demanding property investors and property tycoons (wink..wink) The demanding first time buyers or those looking for a home to live in (on a budget of affordable means) dont stand a chance.  The estate agents need to be better regulated and property investors that also need to be regulated and some what restricted from first choice of purchase....

I agree that house prices are over inflated and I would like the price of my "dream home" to fall considerably. However, having only recently bought my own house, I would certainly not want to see its value fall as I would then be in negative equity.

I think it is easy for people who bought their house pre early/mid 2000s (or have not bought a house) to welcome a reduction in house prices but what about all the people who bought their houses in recent years? How will thousands of people in negative equity help anything? Will mortgage lenders / government help these people out?! Probably not, as lets face it, why should they?

"Az says: The estate agents need to be better regulated and property investors that also need to be regulated and some what restricted from first choice of purchase...."

I think that's a really good point and not one that I've heard before in this context - there's always the blame placed on the greedy lenders, but given that people were falling overthemselves to buy property due to the constant rise in value, why should the lenders take the blame for providing the funding - from their point of view, as long as the value of the houses went up then there was no risk on the borrower as they could sell the property to pay the loan  and no risk on the lender's shareholders and creditors because the property would pay for it. The real problem came when the mortgage debt was wrapped up into financial packages that very few people really understood.

The estate agents, who STILL remain unregulated after countless examples of sharp practice, need to be looked at here too, as do property investors - if I can take out a mortgage and set the mortgage payments against tax (which residential mortgage holders cannot any more - thank you to Gordon for that) then I will keep buying and buying properties whilst prices go up. This will keep driving up the value endlessly. If in the end it all falls apart then I can just go and declare myself bankrupt and 12 months later I can start all over again (again, thanks to Gordon and friends for changing the law on that from 3 years).  

It's amazing how much a Labour government has done to liberalise and deregulate our economy to generate this quite horrific boom and bust scenario and then blamed it on the world economy - what would be interesting is to see how other countries and the way that they ran their economies, in particular personal debt, compare to the mess that the UK is now in. I actually despair, because the debt is so great, it will take more than my lifetime to resolve it, and to be honest, I don't see why I should have to work long hours to hand over large sums of money to resolve problems that had nothing to do with the careful (yes and sometimes dull as a consequence!) way I live my life.

No one can say whether prices are over inflated or not. They are what the current market dictates. In the future it would appear they are likely to rise considerably because the government has very little chance of achieving anything like the building of new homes that it admits is needed. If there are not enough homes then the price will rise. Simple supply and demand. This current situation is, in effect, a simple glitch in the market.

Some errors above,
1: Supply and Demand argument - Does not stand up. There are more than 100,000 empty homes in Englan alone!
2: Who is to blame? Banks? Estate Agents? Greedy Bast*rds?  All, but mainly Estate agents, they want their commision cheques to stay big! My agent offered me and the Mrs, 6.5 X our combined income!! I at him, said thank you very much and have never gone back!! (Part of the Countrywide group)
3: BigRich, £105k for a 3 bed house, don't know where you live but thats sounds like a good price to me!! I live in Manchester and the cheapest 3 bed ex-council house I have found was £100k. (Sounds good, but the Estate agent was clever, they basically marketed at £100k, everyone who asked for a viewing was told that it would be an open house on such a date. That date came, went to view, along with around another 100 people. Lovely house, however upon leaving we were told to put our best offer in to the office by miday Monday. Very clever, a blind auction!! Anyway, turns out the house went for £170k.) My point being, if there were 3 beds around for £105k, then there would not be such a problem.
Back to the supply and demand, Manchester incase you didnt know has had 1000s of new apartment style flats built. I live in one (RENT) However, there are 1000s of them sat empty, they are not practical to live in. Shoe boxes!! Cant swing my arms in them yet alone a cat! So where is the demand for these? There are plenty in supply!!
That's it for now, End of Rant! Thanks

House prices should fall so everyone can afford to buy and not just to make profits!

I think far too much is made of negative equity! Sure its not nice to have to pay for something thats no longer worth what you bought it for. But people seem to ignore the fact that this is an everyday occurance!
Expensive cars, caravans, household appliances etc!! All depreciate in value. Ok so its a lot more money, but thats life, and thats the decision you make when you buy!!
The market cant always go up, its like stocks and shares!
To be honest I have been saying for years that they should be teaching kid's this in school's. Prepare them for the reality's off life!

To Chris Edwards,
The are plenty of decent houses's around mine for under 100k but the area obviously isnt as posh!! I should know, I live in one! Half the problem is as 'BIG RICH' says above, people dont wanna start at the bottom, then complain that there money is being soaked up by there mortgage!! Hense all the empty apartments!
I could easily tripple what I pay on my mortgage (currently) but its got 3 bedrooms, the area is ok, nice neighbours and we have plenty of our wages left over!
Its not good luck, its a choice we made when looking to buy! Plan for the worst (interest rates shooting up) and then look at whats available.

alot of interesting views ,jonathan i think you need to get on the ladder straight away ,if you can pay the rent and save money as well you are wasting valuable years on a repayment mortgage ,unless you have a really high paid job you will not save quicker than the house rises in price .nobody has yet pointed out that the land also helps dictate the overall price 1/3 land,1/3 build,1/3 profit.i say again jonathan go and get yourself a good 10 year fixed rate repayment mortgage ,your wages will go up, the property will go up, all that rent your paying is now mortgage repayment and your most of the way there.i started late in this game but i now have 5x b.t.lets but owe £500,000 on the mortgages but as long as jonathan keeps renting then in the long run i will win because history has shown that your proprty is the safest place for your money.

You buy your house, you live in it for a year then you get it valued. If it goes up you rub your hands and pat yourself on the back. If it goes down, you dig your heels in and refuse to sell. Prices therefore will never go down. I bought ex council 3 bedroom semi in 1988 (bad year) for 25k, eleven years later I sold it for 35k (mug). By the time I sold it I was earning what I sold it for! Morale of the story? Stuff the government for destabilising the economy on a regular basis (Conservative/Labour). Cars go down in value, people accept this. Houses go up in value, people belive this. Buy the worst house in the best area and live on baked beans until your wages catch up.

Mike says "I think far too much is made of negative equity!"

What about if a young couple buy a 1 bed flat (planning on starting at the bottom of the property ladder and working their way up) and then one or two years later the housing market has crashed, the flat is worth half of what it used to be. As an example, say they bought it for £150,000 (South East Prices!) with a 5/10% deposit, its now worth £75,000, how do they then try to move up the property ladder with such a large debt on their hands? (and obviously no deposit to put towards getting a new mortgage on a larger house/flat) Would this mean that they have to stay in this flat for ever more, no chance of having a family and getting a larger flat/house to accomodate them?

What would you "teach kids in scools" about this situation Mike?

Real estate and overpriced and needs to rebalance, definitely.  More mortgages that are reachable by the families with lower incomes also need to be offered.