Depending on what day it might be, sometimes seemingly what time of the day, reports will hit the internet stating if house prices are rising or falling. According to Nationwide building society, October has seen a 'slight rise' in house prices, however reporting a 0.2% drop in the third quarter compared to last year. For people buying or selling property, these figures matter in the short term as it affects their confidence however the question needs to be asked why movements are reported with such hysteria by the media. Yes, most of us have interest in the news and it will affect us all but the Government seems to be doing all it can to steady the ship. It seems that the media is holding a candle for home prices to be the indicator of how the economy is performing, and delivers depressing news when property is not growing above 2% a year.
How can we stop a national obsession with house prices? When we buy property, in most parts of the country we are buying based on a property's desirability and the demand for that property, not necessarily the costs of the land and how to much it costs to build the house (it is always important to know the rebuilding cost when it comes to buying home insurance). If you could somehow remove, or dampen down the 'want' part of purchasing it may remove people's desire to pay 'whatever it takes'. One way could be to remove the valuations and risk away from the buyer and on to the mortgage company, similar to America. Although this did not stop a boom over the pond, it can be argued exceptional circumstances of fraud and unreasonable lending was the main cause, a lesson learned which will now never be forgotten - which makes this the perfect time for change. By transferring risk to the mortgage company (i.e. any fall in value of a property also affects the mortgage company, so if it falls 10% the buyer only loses 10% of their deposit, the bank 10% of the mortgage), it would focus the banks attention on the values they are lending and for what.