A House Price Crash Is Unstoppable!

House prices will continue to fall... and there's nothing anyone can do about it!

How do you catch a falling housing market? Prime Minister Gordon Brown has given it his best shot. Housebuilder Barratt is giving it a go. And with nine out of the top 12 mortgage lenders recently cutting their rates, you could argue that banks and building societies are doing their bit as well.

So what have they come up with - and will it do any good?

Duty calls

In September, Gordon Brown lifted the statutory stamp duty threshold from £125,000 to £175,000 for 12 months. With the average house now costing £164,654, according to Nationwide figures, that will save the typical buyer £1,646.

Brown also unveiled details of a shared equity scheme targeted at first-time buyers called HomeBuy Direct, which will see Government and housing developers offering loans of up to 30% of the value of a home, in exchange for a share in its equity.

Estate agents, mortgage brokers and housebuilders immediately dismissed the plans as "too little, too late", claiming the new stamp duty threshold was still too low, and HomeBuy too limited to have any impact.

I can't imagine trying to sell a property for around £190,000 will be too impressed either, because they will now face intense pressure to dump their asking price below the new zero duty threshold. So this could depress prices even further.

Siege mentality

But I would also question whether the Government should be encouraging anybody to buy a property right now.

Both initiatives smack of using first-time buyers as cannon fodder in a battle to protect the beseiged housing market.

They were the main victims of the house price bubble and I don't see why they should rush to its rescue now.

And I can't imagine many will. I mean, would you? With the entire global banking system on its knees, would you rush to enter one of the most over-priced property markets in the world (even supposing you could get a mortgage)? I don't think so.

The new stamp duty threshold might save you £1,646 today, but with house prices dropping around £130 every 24 hours, you would only have to wait another 13 days to make an even bigger saving. How much will you save if you wait six months? 18 months?

So what we are seeing is the Government throwing taxpayers' money at a doomed attempt to shore up an overpriced housing market.

Desperate measures

Housebuilder Barratt has a more generous stamp duty exemption scheme, offering to pay all the duty on certain properties up to £500,000, saving buyers up to £15,000.

It has also promised to protect buyers of properties worth up to £300,000 from house price falls of up to 15% within the next three years.

Persimmon also offers a range of offers for first-time buyers, including paying their stamp duty, or meeting the cost of their mortgage, utility bills, council tax and household insurance for a full twelve months.

These are moves born of desperation, but credit to them for giving it a go. At least they aren't using taxpayers' money to do it. But given the lack of mortgages, and mounting terror among the public, I don't rate their chances for success highly.

Rate wars

What the housing market really needs is an expanding choice of affordable and available mortgages.

With nine out of the top 12 lenders cutting their rates in recent weeks, mortgages are definitely are getting more affordable, but scarcely more available.

You still need a big deposit or plenty of spare equity, plus a squeaky clean credit record, before lenders will take a chance on you.

Still, falling rates are the one beacon of hope in the housing market right now. They could fall even lower, if the Bank of England cuts base rates in a bid to save the UK economy.

But it also worries me that the best hope we have of solving a problem partly caused by low long-term interest rates is to cross our fingers and hope for more of the same. This can't go on forever, can it?

Mind your feet!

Perhaps I'm asking the wrong question. Maybe the question ought to be: should you catch a falling housing market?

Plenty of people, including myself, would say no. Thanks to low interest rates, the housing bubble inflated to ridiculous proportions, squeezing out pretty much everybody except those who already owned a property.

Of course we all knew it had to go pop, and the resulting fallout would be costly for a lot of people.

I am one of them, before you ask. The value of my house is falling along with everybody else's. Boo-hoo. Thankfully, I bought early in the boom, didn't overstretch myself, and I can afford to meet my mortgage payments. And I still have a job (if you call freelance journalism a job).

Market forces helped bring us to this pretty pass, and like it or not, we have little alternative but to let them pull us out of it.

The Government has got enough on its hands propping up banks targeted by aggressive short sellers, to prop up the property market as well.

It simply hasn't got the money, as the relatively modest nature of Gordon Brown's schemes announced confirms.

Catching a falling housing market is exactly like catching a falling knife. Maybe it is safer to let it drop.

More: Who Can You Trust On House Prices?