Enough humble pie, house prices will fall - Telegraph

[verbatim]

From Roger Bootle in the Telegraph

The last time I wrote at length about British house prices, you were eating cold turkey and I was eating humble pie. You have long ago moved on from the turkey but I have continued to be force-fed the pie. Bearing in mind my earlier erroneous forecast of house price falls, you may well say “quite right too”. But I am beginning to wonder whether my time of penance may soon be over.

Conditions in the housing market look as though they are changing. The RICS survey published last week reported a figure relating to the change in new buyer inquires which was the second-lowest in the survey’s nine-and-a-half-year history. And anecdotal evidence from house builders suggests that they are increasingly having difficulty shifting their stock. Site visits and reservations are all down.

How can this be happening while all the same fundamental supply shortages are still there? As I have long argued, what determines changes in the housing market in the short term is not supply, simply because that cannot change very quickly. What determines short-term movements in the housing market is changes in demand.

I mean demand in the technical economic sense. It is no use saying that, because we all aspire to a five-bedroom detached family house, there is a shortage of housing. I might “want” to own a Rolls-Royce but that does not mean that I will go out and buy one. Demand is all about the price that people are able and willing to pay for something. Their ability to pay is determined by the general economic situation and the availability of finance. Their willingness is determined by their state of confidence and their expectations for the future, both of which will be influenced by economic conditions.

I like his definition of demand.

telegraph.co.uk/money/main.j … tviewedbox