House prices are still too high and will eventually fall back to more appropriate levels, says economist Roger Bootle.
Deborah Hyde, CityWire.co.uk – 28 February 2010
Bootle, the managing director of Capital Economics and economic adviser to Deloitte, points out every other country that had experienced a bubble in house prices has seen prices drop.
‘Every other country has experienced a fall in house prices which hasn’t happened here,’ said Bootle.
He said all sensible market commentators agree that house prices are too high – something he too believes.
This is one of three reasons Bootle thinks the UK economy is likely to bump along the bottom and the risk of a double dip is real.
He said government growth targets are supremely optimistic given he thinks a trio of risks could hold the economy back; the need for significant fiscal tightening, the weak outlook for jobs and the resilience of house prices.
Roger Bootle ?
Capital Economics ?
Never heard of him or his company. Wouldn’t trust an economist as far as could throw him.
Comment by OnTheFence — 1/3/2010 #
Mmm, I guess if you keep saying something is going to happen for long enough it will happen eventually, (though maybe not for the reasons you originally thought!)
Capital Economics and many like them, seem to base their well meaning predictions on residential property prices rather too much on the relationship between earning and house prices (with a little bit of consideration for interest rates thrown into the mix.)
Whilst this narrowish view was OK twenty five years ago, now that there is a big and growing private rented sector – up from 8% of all housing stock to over 14% today – this way of looking at things is a little out of date.
Just as in commercial property, it is now imperative to look at YIELDS on residential property too.
Given a big private rented sector, the yield from renting is far more relevant than in the past.
Yet too many economists ignore it in their models which is why I think their predictions are not correct.
That said, we are still in for some shakey years. Property prices will only grow slowly as long as we have a big national debt to pay off and continued job insecurity.
David Lawrenson
http://www.LettingFocus.com
Topic Expert, Author and Private Rented Sector Consultant
Comment by David Lawrenson — 4/3/2010 #
‘House price falls have been delayed, not prevented’…but only until early May.
This government is in fact like a cowboy builder who prepares a property ‘to sell’, but doesn’t put in proper foundations, builds it on polluted land and ‘forgets’ to connect up the toilets – and you know what happens then.
http://ww.landlordsandletting.co.uk
Comment by Malcolm Stretten — 12/3/2010 #