Q4 2012 UK House Price Update...
Halifax have just today released their Q4 update for UK house prices, so I can combine them with Nationwide's to formulate an average, real price for both the UK and Northern Ireland (where I currently live).
Remember my hypothesis is that house prices are primarily driven by demand, and that demand is primarily driven by the number of people able to buy (not wanting to buy, but able to buy). The grey line on the graph is the number of people in the segment of the population I consider most likely to be in this category and you can see how well past prices have correlated with this line.*
Remember also that this graph is real prices. When dealing with time frames any longer than about a year, the corrosive effects of inflation on the value of money must be taken into account. As I outlined previously, it's more honest to discuss inflation in terms of the falling value of a currency than the rising cost of goods and services.
Since the start of the downturn (Q1 2008), houses have lost an average of ~£770 per month. This has slowed a little in the past year to ~£400 per month.
Given this, I will continue to save a substantial (15% or more) deposit and bide my time until the value of houses in my price range is falling less than the rent I currently pay. I still estimate this to be between 2015 and 2018.
* (Disclaimer - I have deliberately chosen the age bracket that most closely matches the data, rather than a broader segment that shows less extreme swings. However, any segment in the ~30 - 50 year old range fits the curve reasonably well).