Posted by Polonius on 8 June, 2007
I’m no economist, but the following argument just came to me one day, and it seems fairly convincing.
Residential property prices in the UK have climbed ridiculously over recent years, and we keep hearing that there’s going to be a crash. But is that likely? Sure, a significant rise in inflation could trigger a collapse, but there’s a more predictable event that will apply an upward pressure on prices.
The proportion of the UK population who own their own homes increased dramatically through the 1970s and ’80s. Many of the people who bought then are now in their seventies. It won’t be long before they start dying in significant numbers. Their children will inherit their homes, mortgage-free. Suddenly, people who have been struggling to pay their own mortgages will find themselves with six-figure sums to spend.
Yes, a slump in property prices is possible, but it will be against a rising trend.