| UK
House Prices Situation: Strong
UK
House Prices Forecast: Mixed forecasts for
2007.
Shortage
of Supply Drives House Price Growth
Nationwide
this week forecast that house prices
would rise a further 5%-6% in 2007,
despite recent rises in interest rates. Analysts increasingly
believe that a shortage of supply is currently the dominant
factor driving UK house price growth,
rather than the cost of borrowing.
The
rapid rise in single-person households
and the restrictions on new housing developments in
some areas of the country mean that some areas of Britain
are experiencing a shortage of residential property
that can only gradually be remedied.
This
theory was given further credibility with data released
by the Royal Institute of Chartered Surveyors (RICS)
this week. RICS members have reported an increase
in demand for properties in recent months, and data
from October shows that the ratio of homes sold to homes
on the market is at its lowest level for 2.5 years.
This ratio provides an indicator of the strength of
demand for properties.
House
Prices Most Overvalued Since 1948?
The
Financial Services Authority this week instructed banks
to model the effects of a 40% slump in their stress-testing
models, after finding that some banks' testing was insufficiently
pessimistic.
The
FSA emphasised that they were not predicting such a
slump, but that it was necessary for banks to model
such an eventuality to ensure that their mortgage portfolios
were sound.
In
a separate report issued this week, investment bank
Dresdner Kleinwort released research showing that by
conventional measures, the housing market
is presently more overvalued than at anytime since 1948.
However, the report stressed that while property
prices are high in comparison to incomes, mortgage
payments are still relatively affordable, meaning that
a dramatic fall in prices was not a foregone conclusion.
Surveyors (RICS) this week. RICS members have reported
an increase in demand for properties
in recent months, and data from October shows that the
ratio of homes sold to homes on the market is at its
lowest level for 2.5 years. This ratio provides an indicator
of the strength of demand for properties.
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