House prices rose so high that buyers simply couldn’t afford them. That would result in higher unemployment and higher arrears, and turn house prices negative. As Kallum Pickering of Berenberg has noted, there is a close correlation between house prices and consumer spending: a 10% year-on-year increase in house prices normally implies a 2.5% increase in spending. Conversely, falling house prices would have a negative impact on spending patterns, particularly given households’ high level of debt. As the first six months of 2017 have shown, when the housing market is weak, consumer spending is weak.

Source: The Guardian August 12, 2017 15:00 UTC