Monday, September 13, 2010

What Spain can teach us about the UK housing market

What Spain can teach us about the UK housing market

Property bulls believe that high UK house prices reflect supply and demand. They're right. But it's the supply and demand for credit, not houses, that matters. And current conditions in Spain's property market are proof of the fact.

Posted by damien @ 11:36 AM (1241 views)
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5 thoughts on “What Spain can teach us about the UK housing market

  • who stole my pension? says:

    Not sure increasing inflation will cause increasing interest rates. I think BOE will be happy with inflation at 5 to 10% for 5 to 10 years. I think BOE have reached the conclusion (wrongly) that the only way out of this mess is via a large dollop of inflation. More money printing to come!

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  • ontheotherhand says:

    A good post. Thanks.
    WSMP, I think you are right that BOE will try that for as long as they can, but then who will buy our government bonds? Eventually they will be forced to act.

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  • who stole my pension? says:

    Ontheotherhand the BOE will just print more money to buy the bonds, and the government will change the law to force the pension funds to buy more worthless bonds.

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  • WSMP @ 3: the BOE will just print more money to buy the bonds

    The only problem with that is that it creates a self feeding cycle where bond holders realise they are getting mugged and choose not to play ball. At that point the BoE will be the only GILT buyer and there will be a LOT of sellers.
    The only thing is UK favour is that our bonds have longer maturities on average. In truth the BoE doesn’t really set the MLR; rather the MLR is a reflection of market rates. If the BoE fails to follow market rates then the pretense is blown.

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  • sureseam you are showing yr age – MLR :). agree with the point though.

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