The further fall in house prices at the end of last year has made housing look more under-valued relative to income than ever before. (See Chart below.) This appears to be attracting cash buyers and investors back into the market. They have driven 70% of the increase in existing home sales seen since last July, while first-time buyers have been responsible for just 6%. Such favourable valuations mean there is plenty of scope for housing to perform well in the medium-term. But over the next year, weak demand, high supply and many more forced sales of foreclosed properties will push prices lower.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services