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A Fool & His Borrowed Money

House Price Crash Subject In The Media (yet Again)

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originally pointed out in the btl amateur answers on yahoo thread, but i reckon this needs highlighting:


AM, Wed 27th June - UK House price crash inevitable warns ABN Amro as property 50% over valued

The Mail, in the form of This is Money, pulled no punches in this article, which will have made for uncomfortable reading for many...Posted: 11:21 am, 27th June 2007

The Mail, in the form of This is Money, pulled no punches in this article, which will have made for uncomfortable reading for many...

Soaring borrowing costs could spark a housing slump on a 'global scale', investment bank ABN Amro has warned.

Families have taken on 'unsustainably large' mortgages, leaving them vulnerable to the sharp increases in bond yields and official interest rates seen in recent weeks, wrote economist Dominic White.

Britain is one of the most exposed markets thanks to rampant speculation over the past decade, though it is by no means alone.

Claims that shortfalls in the supply of new homes will lead to an inexorable rise in UK property prices in coming decades have 'as much credibility as Britney Spears' latest comeback,' he wrote.

'The decline in global interest rates has now been largely reversed,' White said. 'Rising real interest rates could result in greater economic volatility. I believe this leaves housing markets vulnerable to a correction on a global scale.'

Central banks have raised interest rates to the highest level since 2001 across the 30 members of the Organisation for Economic Cooperation and Development.

Meanwhile yields on government bonds - a key measure for the cost of borrowing - have increased in recent days, sending shockwaves through financial markets.

Although fears for the health of the US housing market have captured headlines, the degree of over-valuation is more 'severe' in Britain, Australia, Spain and Ireland, ABN Amro calculates.

A note by the bank in April found that UK residential property is 50% overvalued, whereas US houses are 25% too expensive.

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