Future of UK House Prices

Interesting article here on the Prospects of UK Housing Market. Evidence suggests that the UK housing market in particular can be subject to booms and busts. A crucial issue is whether inflation has reached its peak, or whether it will continue to rise.

One issue worth considering is that as the £ increases to nearly $2 this helps to reduced inflationary pressure. However most economists argue the £ is clearly overvalued. If the £ was devalued then interest rates would have to rise to take up the anti inflationary slack.

Also real interest rates are still quite Low. Therefore interest rates could continue to rise this year. If they do it could trigger buy to let investors to start selling and then we could witness a return to 1991 Style house prices falls... (maybe :) )

Sterling soars at FT

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