The Royal Institution of Chartered Surveyors (RICS) announced today that they had changed their forecast on house prices for 2009, and that instead of a fall they now foresee a small increase. This raises an obvious question: if they were wrong then, why are they right now? If an organisation with the resources and networks of the RICS can be so wrong about house prices six months ago, how do we know they – or anyone else – are right now?
But, more fundamentally, why should we believe that the problem with housing markets is that prices are falling? Prices are dropping for a very good reason – housing had got too expensive, beyond what many people could afford – and markets are now making the necessary corrections. Instead of worrying about house price falls, and hoping for a return to inflation, we should rather trust that the market will continue to correct the distortions of the last few years and so we will continue to see house prices falling. If we want affordable housing in the UK, this is the only practical way of achieving it, even if it might not suit the property professionals.