1 November 2007The majority of the British public say a major decline in house prices will not change their spending patterns, a BBC survey has suggested.
Of more than 1,000 people asked, 88% said that a price fall of 10% or more would make no difference to spending on everyday items such as groceries.
The findings appear to question whether a downturn in the housing market would actually damage the UK economy.
The study is part of a BBC Two series investigating the housing market.
The series aims to counter the plethora of go-go property programmes by drawing attention to some widespread public myths about what property prices do for your finances.
Many economists believe a fall in house prices would affect consumer confidence and therefore High Street spending.
And some political commentators also believe a fall in prices would have political consequences at an election.
But these findings, from research commissioned by the BBC and conducted by ICM, appear to contradict that.
In addition, four-fifths of those interviewed say it would make no difference to their willingness to borrow money for large purchases such as cars, holidays or new kitchens.
The findings raise doubts about the validity of concerns that a fall in house prices would pitch the economy into recession.
At the same time, there is growing discussion of an "affordability crisis" occasioned by high prices.
Evidence gathered by the series, The Truth About Property, casts doubt on whether the government can meet its aim of enabling 240,000 homes a year to be built.
In Basingstoke, among the fastest-growing areas in the country for new houses, dozens of developments have been approved and thousands of houses are being built.
However, building has been held up by local opposition and legal battles over planning and development.
In one development, the developer obtained the land in 1992. In spite of it being an abandoned Ministry of Defence site - the type the government has in mind to expand housing supply - building is yet to take place.
A report last week by the National Housing and Planning Advice Unit, the body that supplies independent advice on affordability to local and central government, says that the government should be aiming at 270,000 homes a year, rather than the current target of 240,000.
Even if the government succeeds against the odds in hitting its target, that in itself would not be sufficient to bring prices down over time to an affordable level.
The same point has been made by the Bank of England monetary policy committee member Kate Barker, who has reported on the supply of housing and the planning system after being commissioned by Gordon Brown.
Her point is that the supply of new housing in itself is a small proportion of the total stock of housing - and therefore in itself would not be sufficient to influence the market enough to make houses more affordable.
She says a much greater role would be played by expectations - the direction home buyers believe house prices will take.
back to News Articles