Monday, Sep 21, 2009

Why Britain's house price crash is far from finished

This Is Money: Not over yet

The Economist magazine stood out for well-structured and early warnings of why the property market would crash in 2005. Price rises kept on coming for another two years, as did the warnings from The Economist. Their latest quarterly review has been released and captures succinctly why Britain's house price crash is far from over: In Britain house prices remain 170% higher than they were in 1997, but average earnings have risen by only 55% in the same period.
British wages are unlikely to grow in any significant way for several years - due to slow economic growth, rising unemployment and higher taxes.
So if the link between earnings and house prices is to be restored, then Japan's long-term performance (-35% over 12 years), is the best guide for where our house prices are headed.

Posted by little professor @ 07:30 PM (1525 views)
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1. quiet guy said...

It's hard to beat an article with the words "house price crash" in the heading for relevance.

I wonder how we will do in a decade of economic stagnation? The Japanese are reputed to have a strong savings culture so they entered their 'lost decade' with savings to help get by. Of course, I'll cheer on a property crash but wonder about where this country is going.

Monday, September 21, 2009 09:10PM Report Comment

2. alan said...

"...but wonder about where this country is going".

House prices are intertwined with economics and politics in this country. Gordon Brown's team have, IMHO, sought to manipulate our economic situation in order to present NuLabour in the best possible light to the electorate to get votes. I would have preferred a more prudent approach, involving keeping house prices down 1999-2006, when Brown was Chancellor.

All credit to "The Economist" for telling it as they saw it. Pity the government didn't respond in a way which would have helped the UK.

As result of Gordon's mismanagement of the economy, I too wonder where the UK is headed. Hardly surprising he gets so much criticism on this site (LP's earlier comments this morning).

Monday, September 21, 2009 09:39PM Report Comment

3. paul said...

You know what? In another two years time, the fact will be that the world economy will have long since weaned itself off cheap credit and its consequences and our esteemed leaders here in the UK (whichever bunch of numpties they'll be) and economists will still be looking puzzled, scratching their heads and saying "Why isn't the UK out of the credit crunch yet?".

That's where the country is going - the same place it has been going for the last two years since the 'crunch' started - nowhere fast!

Monday, September 21, 2009 11:27PM Report Comment

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