It’s possible that house prices will fall a little in 2008. It’s just about possible they may even fall by a lot (although I’d happily stake my life that they’ll fall by less than 20%).
However, it’s absolutely certain that house prices by the end of 2012 will be higher in real terms than they are now. And it’s highly likely that the return on house prices between now and the end of 2012 will exceed the base interest rate.
“So, why don’t you put your money where your mouth is?” – well, because I’m quite happy in my current rented set-up, I’m not sure about where I’m going to be living for the next two years (during which time I accept I could lose money), and I don’t want to be a landlord right now.
Still, anyone who thinks that an investor with more than five years’ liquidity/time before they’d like to sell will lose money (say, the government on Northern Rock’s house estate…) is an idiot.