Wednesday, Mar 08, 2017

Better than the prospects for renters :(

Shaun Richards Notayesmaneconomics blog: What are the prospects for UK house prices?

UK economic growth has been amazingly steady but the issue will come in the latter half of the year when we are hit by higher inflation levels. These days what was previously regarded as relatively low inflation ( 3%+ on CPI and 4%+ on RPI) has a larger impact because so far on the credit crunch wage growth has not risen with it so we saw a sharp fall in real wages around 2011 for example. It is not impossible that the Bank of England could cut Bank Rate again or produce other house price and bank friendly measures but even they may balk at that with inflation above target. Thus house price growth looks set to fade and the price falls will spread out from Central London. How far across the country they will go depends on the mix between economic growth that 2017 and 18 deliver to us.

Posted by quiet guy @ 01:04 AM (6060 views) Add Comment

1 Comment

1. icarus said...

"One of the features of the UK economy is the way that its performance is so often tied to house prices."

What does this mean, given that he later writes?:

"As well as rising sharply in nominal terms, housing wealth has grown in relation to the size of the economy: it was equivalent to 1.6 times Britain’s gross domestic product in 2001, rising to 3.3 times in 2007 and 3.7 times in 2016. ( Financial Times )".

Asset price inflation usually draws investment AWAY from the real economy, partly because the associated debt is a drag on economic activity and it becomes more profitable to invest in paper.

Wednesday, March 8, 2017 12:04PM Report Comment
 

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