House prices are falling - sorry, they are

We’re told that house prices are up:

The average cost of a UK home passed £300,000 for the first time in January, as house prices increased at the fastest rate since November 2024.

This is not really true and it’s certainly not usefully true.

Data released by Halifax showed that house prices rose 0.7% month on month in January, the fastest rate since a 1.1% increase was recorded in November 2024. On an annual measure, prices grew 1%.

So, inflation over the year 2025 was 3.4% or so. Depends whether we use CPIH (which, given that it includes housing costs, perhaps we shouldn’t) or CPI or core of either etc. A 1% nominal price rise in a 3.4% inflation economy is a fall in real prices.

Real wages grew by a further 1 to 1.2% over the year as well. Meaning the ratio of house prices to wages fell more.

That is, house prices are doing what we want house prices to be doing, coming down and becoming more affordable. We should, of course, be doing more about this by blowing up the Town and Country Planning Act 1947 and successors - proper blow up, kablooie - and in general gralloching the bureaucracy. But house prices are moving in the right direction. Which is good, right?

Tim Worstall