Great news: house prices will fall in 2024

House prices are expected to stagnate or even fall slightly this year, as they did last year – and hurrah for that. What this country desperately needs is less property inflation. But despite this projected fall, rampant price rises will be back soon enough; and it is not difficult to see why.

For a start as the Financial Times reported this week, the multibillion-pound fund set up by the government in 2017 to boost housebuilding has failed to spend two thirds of the £4.2 billion it has available.

As a result, the government has confirmed that work has started on less than 10% of the houses it promised, and it will once again miss its target of building 300,000 homes a year.

That is a disaster, the country is short of homes and houses and there is a homelessness crisis. While house prices have been stagnant over the last year as higher interest rates have hit hard, that is only a pause in an almost constant trend of ever-higher prices. The cost of renting a house also continues to soar.

In the 12 months to August 2023 rental prices rose 5.5%, the highest figure since records began in 2016. This is a sure sign that ever-higher housing prices over the last decades and now higher interest rates are being passed on to those who cannot afford them. That means that many people will struggle to rent and will never be able to buy – they can’t pay higher rents and also save for a deposit.

What the country should be aiming for is stagnant house price inflation or even falling prices, making homes cheaper to buy, meaning we spend less on rents or mortgages and homeowners will stop making mad profits just for buying a roof over their head. If supply ever exceeded demand that is what would happen.

But every time the government misses its house building target the problem just gets worse. Policies like Help to Buy, which subsidise or underwrite home buyers, just make things worse by pushing prices up further. They make house builders more money for building fewer homes – a ridiculous position to be in. It means taxpayers are paying to boost home building companies’ profits and to force house prices higher.

What the country needs is a huge and sustained boom in house building, especially starter homes, social and council housing and homes that wealthy pensioners can downsize into, freeing up more stock for younger families.

There is money available to do this. For a start there are the billions the Tories have not yet spent. Also, freeing up councils to build on their own land, or allowing them to sell it at a profit to developers, would bring in more. Training thousands more apprentices to work in construction would also help.

But after 14 years of Tory failure, what this country really needs is a sustainable strategy of home building, like in the 1950’s.

The aim would be not just to meet current demand, but also to end the scourge of house price inflation that has been distorting the economy for decades.

After all, housing is the only sector in which constantly rising prices are seen as a good thing, when in fact it is a signal of abject failure.

You can read more from Jonty on Substack, at Jonty’s Jottings