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Friday, October 19, 2007

IMF Warning on House Prices

With the price of houses in the UK now standing at nine times the average salary, the IMF has finally decided to suggest that there is a high risk that property prices in the UK may fall.

In their view house prices are overvalued by 40%.

However, the report ignores the fundamental structural weaknesses of the UK housing market which in fact underpin the prices:

1 There is a shortage of supply

2 There is an inherent desire to own property

3 There is a large variety of readily available mortgages

4 There are large numbers of wealthy foreigners seeking property in the UK

5 City mega bonuses are distorting the London market, the ripples from which affect the rest of the UK

Only when the above 5 points have been reversed, or nullified, will the property market crash.

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