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OECD - Deloitte Morning Briefing - In search of affordable housing

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I sign up for a few of the economic updates and this one popped through today.

Note : It will eventually come up here but may take a couple of days http://blogs.deloitte.co.uk/mondaybriefing/

Some snippets

"In the UK, house prices have risen 37% since 2009. With incomes rising more slowly housing has become more expensive relative to incomes. For homebuyers this effect has been partially mitigated by very low mortgage rates.  

* Financial crises generally lead to sharp declines in asset prices, making housing more affordable. It’s been different this time because central banks set out to bolster asset prices in the wake of the global crisis by slashing interest rates and undertaking quantitative easing. Cheap money has worked its magic, lifting the price of housing, equities and bonds across the world.   

* As a result, house prices in many countries look stretched relative to long-term yardsticks.

* A standard measure of affordability compares house prices to rents and to incomes relative to long-term averages. At £226,351 the average UK house is almost eight times median annual earnings. The OECD estimates that UK housing is 29% overvalued against incomes and 41% overvalued against rents

 Within the UK, housing in London and the South East is the priciest, with London overvalued by 34% against incomes. That makes London housing as overvalued as the Belgian market which is one of the world’s most expensive. 

 Housing has ridden a wave of cheap money in the last decade, pushing prices to new highs. Affordability varies within and between countries. But even for homebuyers in regions with stretched valuations, ultra-low financing costs have helped ease the pain. 

* With the global interest rate cycle starting to turn up, led by the US, the balm of cheap money seems set to retreat. It is hard to see house prices repeating the stellar performance of the last ten years in the next ten. 


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  • 417 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
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