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Demand and house prices dependant on people’s ability to pay

After reading a letter in last week’s Mortgage Strategy entitled ’Silly comments on house prices ignore supply and demand,’ I felt obliged to write in.

The author was quoted as saying that housing shortages, combined with the fact that the UK is a great country to live in, explain why prices as a whole will increase.

If this is the case, why are house prices now 20% lower than they were four years ago?

It’s not as simple as a case of supply and demand. Demand has to be understood in the context of a person’s ability to pay.

If the author of the letter thinks that we’re heading back to the days of 2007, he’s kidding himself but no-one else.

Prices are too high and are coming down. I agree that the market should be allowed to take its own course. That means no more propping up prices with unrealistic interest rates.

Peter Wilkins

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