Halifax’s house price index confirms that the price of the average house is now £154,716. This is a return to a level that we had last seen in 2004.

The average property price fell by 1.7% in April and this is making property far more affordable, especially to those only starting out. The question everyone is asking is whether falling property prices are good or bad? The answer largely depends on your viewpoint. Someone with a good credit record and a substantial sum saved up may be overjoyed at the falling property prices. After all, property has become more affordable. However, people wanting to sell property and downscale may feel less glee as values may lower than when they bought. So, they’ll lose money.

The impact of low property prices

Property prices are one of an economy’s main economic indicators. This means that we’re in a recession when property prices are low, whereas high property prices indicate that we are enjoying a boom period.

Prospective buyers and investors who are not dependent on a bank-approved mortgage may welcome recessions as properties become more affordable and banks’ criteria become more stringent. This excludes people who do not have good credit histories and who do not have substantial deposits.

The impact of high property prices

Homeowners who find themselves in negative equity would welcome an increase in property prices. These people’s mortgage values have exceeded the amount that the property is worth. More than 900,000 homeowners have negative equity mortgages, according to the Council for Mortgage Lenders.

Higher prices mean prospective buyers need more money and a bigger deposit to afford a property. Thus, it becomes more expensive, with the poor and young professionals alike finding they need government assistance to afford their own properties.

The housing market affects rentals

People who cannot afford their own properties often rent a property. They do this because monthly rentals are less expensive than monthly mortgage payments for the same type of property in the same neighbourhood.

Once rental demand saturates from the influx of people who can’t get a mortgage, rentals will become more expensive.