House prices are starting to turn. Halifax has reported the first quarterly fall since 2012 in the three months to April - blaming affordability and political uncertainty. It comes hot on the heels of news of the slowing market from Nationwide. However, we don't believe a word of it.
A separate Halifax survey back in April looked at how confident we feel about the housing market, and found a very different picture. Some 58% of people expect the average property price to rise in the next 12 months - compared to just 14% who expect house prices to fall.
There are seven good reasons for this - sadly none of them based in reality. It all comes down to the way our brains work - which means we tend to think house prices are set to rise - regardless of evidence to the contrary.
1. Recency bias
This tendency means we place more emphasis on events that have happened very recently - over and above things that happened a while ago. Several years of house price rises have given us the sense that 'house prices rise'. We forget the big bubbles and crashes of the past because they are further away - and thus feel less important.
2. Herd behaviour
This is our tendency to believe there's safety in numbers. Other buyers, sellers, and estate agents, all seem to be setting high prices, buying and selling quite happily, so we assume they can't all be wrong - despite the fact that they can.
3. Familiarity bias
We have faith in things that seem close to home - and what could be closer? It means it takes a lot to shake our faith in the intrinsic value of our own property.
4. Confirmation bias
This is our tendency to believe the things that correspond with our world view, rather than treating all information as equal. It means we discount the Halifax research, and listen to our neighbour who says that prices will always rise in such a desirable neighbourhood.
5. Hindsight bias
We look back at major events - like house price crashes - and highlight clear indications that it was imminent. We forget that at the time, nobody spotted it, and so when we get subtle signals that house price falls are on the way - we choose to ignore them.
6. Endowment bias
This basically means that we place a higher value on an item that we own ourselves. Given that we own our own property - and it's the most valuable thing most of us will ever have - we cannot imagine it ever being worth less.
Humans are incapable of putting an absolute value on anything, so we work on relative prices. When it comes to house prices, our relative price tends to be the amount we paid for it. We assume that this is what our house is worth, and cannot therefore envisage a time when it falls below this price.
But what do you think? Is our faith in the housing market justified? Let us know in the comments.
Most viewed property of the year
Most viewed property of the year
This unassuming three-bedroom detached house in Martins Heron in Berkshire doesn’t immediately look like the kind of property to draw the crowds. However, the fact it was used as Harry Potter’s home in the first of the films means we were intrigued to see inside this £475,000 property that was ideal for commuting.
This was an impressive seven-bedroom home in Upper Denby, on the market for £1.3 million - with plenty of rustic charm and a wood-burning stove. However, we all know the real reason this made it to the list of the most-viewed properties: it’s the enormous play area complete with pirate ship that you can just catch sight of through the lounge window.
This five bedroom relatively newly-built mansion has every whistle and bell you could wish for - from a cinema and games room to a gym, swimming pool, and a dining room that’s big enough for a grand piano in the corner. It’s still on the market for £1.05 million, and is right next to Lincoln Golf course if you fancy playing a round.
Unsurprisingly, this development project on Chadwick Road in East London has been snapped up. At just £1 million you got 13 rooms over four floors - with off-street parking for three cars. No wonder it was the seventh most popular home for us to look at, and dream that with a bit of elbow grease we could have a huge London property... and we could finally park somewhere near it too.
This is a home that comes with a dream lifestyle. For just £1.4 million, you can get an incredibly swanky five-bedroom farmhouse in seven acres of lovely Welsh countryside. You also get a two-bedroom barn conversion - either to house visiting family, or to run as a holiday letting business. The house is still in the market - so that dream could still be yours.
Ever fancy your own posh lakeside hideaway with its own jetty just over an hour from London - for just £2.8 million?
For just £545,000, this 6-bedroom house in Donaghadee could be yours. The property itself is very recently developed in an elegantly rustic New England style. There's plenty of room, and a dream bathroom. But possibly the reason it features so high up the list of most-viewed houses is that it comes with a paddock and stable - perfect for anyone with horsey aspirations.
It’s easy to see why this pretty £375,000 cottage is in such high demand. First is the fact it has been rebuilt from reclaimed stone, so combines old world charm with handy modern features (like a good-sized kitchen and fancy bathroom). Then there’s the location - right in the centre of the village of Holmfirth - best-known as the setting of Last of the Summer Wine.
This impressive house in Bromley in Kent has footballer written all over it. From the pale grey colour scheme, to the acres of space, and the enormous patio for entertaining, there's plenty for a footballer to love. At just £1.7 million it’s pocket-change for them too. For the rest of us, there’s the chance to dream of a mansion within commuting distance of London for the price of a flat in Notting Hill.
There was a time when a semi-detached five-bedroom home in Hampstead Garden Suburb was the sort of thing that ordinary families could aspire to. Now it's the kind of thing we spend our time daydreaming over on property websites: marveling at a 90 foot garden and the fact it has a garage. The price tag of £2.25 million means it's the kind of house we can only ever afford to look at online - which is probably why it's the most viewed property of the year.