Monday, October 11, 2004

Now that's a bubble-popping forecast.
[Housing] Prices in London fell 0.4% on the month, dragging the annual rate of increase to 6.5% from 8.4% in July. The ODPM said the average house price in August was just under �179,000, up from �177,500 in July.

Economists said the numbers confirmed their suspicions that the boom of recent years was over.

"With valuations at all-time record highs, confidence low and the full impact of higher interest rates yet to be seen, it seems likely to us that outright falls in average house prices, such as those seen in London in August, will become more widespread over the coming months," said Ed Stansfield of Capital Economics.

He predicted prices would fall 20% over the next three years.
Other reports out of the UK suggest that the Bank of England continues to fret over inflation at the producer level, and thus the signs are that interest rate hikes are not yet complete in Britain. It is roundly recognized that the last 25 basis point interest rate increase put the brakes on the runaway London housing bubble. Another 25 might just pop the thing.

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