UK House Prices Shaky as Election Fears Push up Supply

UK house prices could be in for a bumpy ride as estate agents report a scary 6% increase in houses coming onto the market in March. This, the third consecutive jump in the number of houses coming onto the market, and, according to agents is representative of pre-election jitters in the home-owning community.

The rise in UK house prices, which began in March last year, has been primarily as a result of drastically weak supply, with rises in demand getting bigger as time progressed but never big enough to support the growth that was being seen.

Now that supply is rising it is highly likely that the falling prices recorded by the Halifax and Nationwide in January and February could become a downward trend lasting the entire year -- or at least half of it.

That said: the Land Registry index is still showing positive growths. The Land Registry must be called the most accurate equally when it is disagreeing with my theories as when it is agreeing with them. Further, I was predicting a second correction for most of last year and prices never turned negative again. You'd think I would give up wouldn't you?

Regular readers of mine will know why I don't: the credit crunch scenario is only one reason behind the UK housing correction. Another is the fact that prices became inflated and unaffordable for a large majority of the population -- in short: a correction was necessary and to do just that; correct the problems the market's growth had given birth to.

However, prices started growing long before the situation had been corrected, long before properties became affordable for those most in demand of them. In this, a further correction became inevitable as far as I am concerned, and for every month that it didn't come I held out that if it doesn't happen now or soon, we are only storing up trouble for the near future.

Now, with supply rising it looks like the first half of 2010 could be that near future. Election uncertainty could easily put pressure on demand as well as increasing supply. Then, no matter who gets elected we are looking at cuts, with one party likely to make more severe cuts than the other, either way these cuts will undoubtedly further affect demand, and likely further increase supply as well -- one way or the other.

Like I said, I have said this many times before and it has yet to come true. Only time will tell if this time is any different.

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