House prices ‘set to tumble by 40%’, warning from ex-government housing adviser

Britain is facing a property price crash – and the return of negative equity.

The warnings come from Paul Cheshire, a former government housing adviser and professor of economic geography at the London School of Economics.

He said: “We are due a significant correction in house prices. I think we are beginning to see signs that the correction may be starting.

“Historically, trends seem always to start in London and then move out across the rest of the country.

“In the capital, you are already seeing house prices rising less rapidly than in other parts of Britain.”

He said that falls in real incomes – where wages do not keep up with inflation –  are likely to be a factor.

The Council of Mortgage Lenders recently said the housing market has stalled; but most house price measures, including the latest from Nationwide, show residential property prices going up, bolstered by shortage of stock.



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  1. eltell

    On past performance I would take everything said by a government advisor with a pinch of salt!  Supply and demand old boy – simples.

    1. P-Daddy

      I always find Paul Cheshire very succinct when he talks about property and makes predictions…this from 2015!! HAHA
      ‘We test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 Local Planning Authorities in England between 1974 and 2008. Exploiting exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints-measures, we find that: regulatory constraints have a substantive positive impact on the house price-earnings elasticity; the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; and uneven topography has a quantitatively less meaningful impact’.
      So now you know, thanks Paul

  2. mattfaizey

    Plenty know that just so long as they keep on predicting a crash, one day they’ll be right.

  3. LandlordsandLetting

    In the 90s Sting said he’d lost his faith in politicians because they all looked like game show hosts to him (now they do).

    Well, ever since I bought some oil based bonds a couple of years ago and they plummeted in value as the oil price totally collapsed, I’ve lost my faith in financial ‘experts’. To my knowledge, not one of them ever predicted the oil price crash. And given that it was due to the boom in shale gas output in the US and the slowing of the Chinese economy, surely it should have been predicted by so-called experts?

  4. Property Paddy

    He may be “professor of economic geography at the London School of Economics” but it doesn’t necessarily follow that a price correction in the South East would ripple out to the rest of the UK.

    in fact I have said this a number of times before: London and the south east plateaued a couple of years back and now it’s in the doldrums and will be like that until London and UK wage inflation catches up. It’s not going to crash unless something else happens like a hike in interest rates.

    If we see mortgage interest rates rise by 2 or 3% from where it is now this would impact significantly the London market. that said there are a number of “Just about managing” who are at present clinging on to their homes waiting for wage inflation, who would sell up if we had an interest rate rise.

    An interest rate rise would do two things, it would increase the number of property for sale and this in turn would get the stalled property market moving again.


  5. Trevor Mealham

    With FTB’s now facing 40 year mortgages to get on the ladder, that’s well out of sync with 25 year mortgages just 7-10 years ago.

    Gov changes as to the BTL market and landlords and imploding greater tax on SDT and reducing mortgage interest offset and making lower rate energy properties illegal to let come April 2018 can only add to those with properties having to find more funds to operate.

    Bumpy road ahead for sure

  6. StatementOfFact

    40% ?? F**k off.

  7. surrey1

    Wouldn’t bet against a correction, but I highly doubt 40%. 10% possibly. Prices in South East certainly far too adrift from earnings, but low interest rates and a shortage of supply will underpin it is my guess.

  8. Mark Connelly

    Problem for economists with UK housing. Is that it tends not to do what economic models suggest it should. Economists seem to have trouble factoring in aspiration and emotion to their models and just treat houses like another asset class. Hence the reason they almost never get it right.

    Yes they are overpriced, yes wages are too low, yes BTL is on the floor, yes the government has not a Scooby and hasn’t had for 40 years but despite all that, the UK housing market has always displayed a resilience that other assets classes never get close to.

    Apart from government advisors and students who can advocate hope over experience. No one really believes houses in the UK will cost less in 10 years from now than they do today and that is still a factor in why so many desperately want to buy.

  9. Woodentop

    The warnings come from Paul Cheshire, a former government housing adviser and professor of economic geography at the London School of Economics.


    No wonder the country housing is in a mess. I bet he can’t change a tire without a manual!

  10. AgentV

    In our neck of the woods prices have only risen 15 to 20% since the peak in 2007 just before the banking collapse….. nearly 10 years ago.

    What have they done in other people’s patches?

    1. surrey1

      40%/45% up. Volume dropping like a stone however. Average fee in cash terms largely unchanged.  


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