LONDON: Most regions of the United Kingdom are already in a house-price bubble, according to an economics professor from Warwick University, the British Broadcasting Corporation reported on Wednesday.
Prof James Mitchell said house prices were overvalued when compared with incomes, raising the risk of a fall at some stage in the future.
Of 13 regions in the UK, he said 10 were currently overvalued.
However, most other economists believe property prices are still affordable, given very low mortgage rates.
“The results raise the risk, although not the certainty, that house prices will fall,” said Prof Mitchell, although he said it was difficult to say when that would be.
“But a bubble it appears to be and we should all — householders, business people and policymakers alike — be alert to this risk.”
Prof Mitchell, the head of economic modelling and forecasting at Warwick Business School, used house price and incomes data from the UK’s largest mortgage lender, the Halifax.
He was previously a senior research fellow with the National Institute of Economic and Social Research for 12 years.
He defines a bubble “as a time when prices exceed fundamentals, or when price exceeds value”.
According to his research, London is the most overvalued region.
Scoring those regions on the likelihood of a bubble, he said there was a 93per cent probability that London is “in the grip of a house-price bubble.”
Wales is the next most overvalued region, with an 83 per cent chance of a bubble, followed by north-west England with 80per cent. The UK as a whole scores 77 per cent.
Prof Mitchell said Scotland and Northern Ireland were unlikely to enter a bubble phase, and the chances for eastern England were “evens”.
He was particularly gloomy about the point at which interest rates rise.
The Office for Budget Responsibility currently expects that to happen in 2015.
Prof Mitchell said at that point there would be a risk that household and bank finances would be “stretched to breaking point”.
“This raises the spectre of falling house prices, negative equity, bad assets on banks’ balance sheets and a return to the so-called great recession we have been so slowly emerging from,” he said.
View Source
Join thousands of Nigerian who use Ngcareers to discover new vacancies that interest them, follow updates on their career areas. Go here to Start Using Ngcareers FREE
‘We are in a housing bubble’
by ngcareers
from Ngcareers Blog http://blog.ngcareers.com/3283/we-are-in-a-housing-bubble/
via IFTTT
0 comments:
Post a Comment