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Monday, June 16, 2008

No stagnation, but a house price crash

A carefully-reasoned post by "Alice Cook" on UK Housing Bubble concludes that house prices will drop 25% quickly (by the end of next year).

The alternative (house prices stagnate, allowing inflation to achieve the same result more slowly) has become unsustainable because of fears respecting the stability of the banks.


Wolfie said...

I think the analysis is credible but I'm not convinced it will return to trend so quickly, thus inflation will cushion the landing so to speak. The BOE intends to keep rates relatively low I believe, which will produce this effect, coupled with the commodity bubble doubly so. The stinger for all of us is that I think wages are stagnating.

My wife has just got back from visiting her parents in Spain. She reports that in spite of the crash being far worse flats in the centre of Oviedo (small provincial city) are on the market at prices equivalent to riverside zone one London apartments. Reasons on a postcard please.

Sackerson said...

I think the reason is the growing disconnection between the fortunes of the rich, and those of the rest. I understand the top end of the housing market here in the UK is also holding up.

hatfield girl said...

'the growing disconnection between the fortunes of the rich, and those of the rest'

Absolutely, S. People have not realised how much better off they might be, nor has poverty in terms of losing what they have yet begun to bite deeply. But the scaling down, the scrimping, the no real choice, has entered many lives. A small example: pretty frocks in Florence for 70 euros cost £150-200 in London. Meals that cost 50-90 euros cost £100 and upwards. You should see the public transport services in German provincial cities. The comparisons go on and on.I realise comparing like with like is hard, but ordinary people in ordinary towns are having meaner lives than they should be - where are the music schools, the sports facilities, the pristine parks, the festivals and concerts frequented by all?

We live our lives in different ways in different cultures, but some awful gaps are opening up.

Sackerson said...

Thank you, HG, you open up a rich field for further comment.