You know, I think you have answered part of this question yourself! The house market is, like all sales environments, subject to supply and demand, but it is much more complicated than that. Affordability of property, which is measured by how many times an average income is the average house price, is fairly high at the moment - so people don't have a lot of leeway, and houses are hence regarded as 'expensive' - this is partly why some people think that house prices may (and I stress may) fall further. I do not anticipate any imminent crash, though, I my personal view is that further falls will be relatively gentle and mild, with sharper falls certainly not out of the question.
But who really knows what is going to happen to the economy? The fiscal tightening that has been going on will soon start to bite pretty hard, and an increase in both unemployment and living costs is hardly likely to encourage anyone to buy a house or trade up. Apart from factors which might actually prevent people from buying, the real issue is sentiment, which is the fundamental factor affecting all asset valuations. If people don't buy, because they are scared that house prices might fall, or scared that they could lose their job, or scared that prices are rising, then there will be a definite downward pressure on house prices, then that downward price is a prophecy likely to be fulfilled.
Lack of lending caused by strict lending criteria do not help, but mortgage conditions have eased a little recently, with smaller deposits being required, though it is still very difficult for the first time buyer. Nevertheless, although a factor, I think my previous points are of greater significance. And, no, the BoE can do nothing. It does not have a remit to buoy up house prices anyway, and if it did, the only possible action it could take would be to drop base rate. I cannot see any likelihood whatever of a base rate lower than the current 0.5%, but I really would like lenders to be more 'first-time buyer friendly', which could make a vast difference to individuals and the economy as a whole. | 01.17.11 @ 18:07