House prices in Britain are overvalued by about 30 per cent, HSBC said yesterday, sounding the alarm that the property market could suffer a similar slump next year to that experienced in the United States.

Gabriel Rozenberg, The Times – 29 November 2007

The alarming report from the bank’s chief UK economist, which gave warning that the coming property downturn would cause the pound to plummet and force the Bank of England to cut interest rates aggressively, came as official data revealed the fastest fall in London house prices for more than two years.

HSBC tried to model the fair value of housing based on expected future rental growth. Karen Ward, the report’s author, said: “There is around 30 per cent of the current house price level that cannot be explained.”

The findings echo those of the International Monetary Fund, which last month calculated that homes in Britain were overpriced by up to 40 per cent – full article