A Roof over your Head House Price Peaks in the UK and Ireland.pdf

A Roof over your Head; House Price Peaks in the UK and Ireland Peter Richmond School of Physics Trinity College Dublin 2 Ireland ________________________________________________________________________ Abstract We analyse, following recent work of Roehner, changes in house prices for both the UK and Ireland. We conclude that prices in the UK/ London have reached a tipping point and house prices relative are set to fall over the next few years. If inflation does not rise then a hard landing seems likely. House prices in Ireland are shown to have broken away from the moderate rise still to found in Northern Ireland and Dublin has emerged as another global ‘hot’ spot. An evolution similar to that in London can be anticipated Keywords: Econophysics, house prices, real estate, bubble, prediction PACS: 89.65.Gh, 89.90.+n ________________________________________________________________________ Introduction House prices are of concern to many people and at present they seem to be going through one of the periodic up turns. The Financial Times of May 7, 2006 carried on the front page the headline: ‘Property Bonanza in Central London’ and noted that ‘a mini-boom is sweeping the most exclusive streets of London where house prices have risen by 14.5% in a year.’ On a different page of the same newspaper there was a rather more cautionary announcement: repossession orders were now at their highest level since the previous peak that occurred as property prices were falling in the early 1990’s. In Dublin house prices that have risen albeit slowly for many decades have been rising very quickly since 1997. One commentator recently reported that ‘Frenzy’ in the Irish property market has intensified. In the last six months, house price inflation has accelerated to an annual rate of 15%. In Dublin, prices are rising at annual rate of 20%, up from only 3% less than a year ago. But rents have only recently recovered after three- year period in whic