May 14, 2008 | posted by Michael Baxter in House prices |

The wonders of modern technology, eh?    Thanks to a 10 mega pixel camera we now know what the Government really thinks.

Housing Minister Caroline Flint got caught out.  There she was off to Number Ten, with a wedge of papers in her hand, and some bright spark chose to take a picture with a powerful high res camera.    And the words were revealed “Given present trends, they [house prices] will clearly show sizeable falls in prices later this year – at best down 5-10 per cent  year-on-year.”

They went on:  “House building is also stalling. New starts are already down 10% compared to a year ago. Housebuilders are predicting further falls. Having seen net additions reach roughly 200,000 in each of the last two years, the figure for 2008-09 is almost certain to be well down on that.”

Well the notes are not wrong.    What is a little odd is that the Government has resolutely denied a big fall in house prices is under way.

Actually, a 10 per cent fall this year is beginning to look optimistic.  Latest figures from the Council of Mortgage lenders reveal that mortgage lending is down yet again. Now, the number of loans for new homes are at their lowest level in 30 years.

But never fear, the Government has woken up to it now, and it’s off with measures to help first-time buyers.  Measures such as more share ownership schemes.

The snag with these measures is that all they do is attempt to make it easier for people to pay more for their house.    Shared ownership does nothing to fix the underlying problem that house prices are too high.

Normally, the Tories’ idea of reducing stamp duty would not help much either, because the fall in buyers’ costs would have led to a corresponding rise in price. Although, in a time of crisis, it might not be such a bad idea.

But the most telling comment was this one, from the FT: “Some observers are increasingly wondering why the government wants more youngsters to get on the housing ladder when they face the prospect of losing money by doing so.”

And that in a nutshell says it all.  Actually, house prices should fall.  Rather than alleviate things for first-time buyers, the Government is better off letting things drop, and instead needs to find a way of alleviating pain for homeowners who find themselves with negative equity.