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News: UK walking the US housing 'tightrope'

Mon, 22 Oct 07

Britain may be facing a US style house crash, claims the International Monetary Federation...

The IMF recently stated: “There is evidence to suggest that the UK and a number of other European nations are also vulnerable to a price correction. UK house prices have risen far higher than incomes over recent years. A lack of supply could continue to hold up UK prices”.

An IMF spokesperson added: “the UK and other western European housing markets are in a better state than that in the US, because they have generally avoided the sub-prime mortgage industry. This sector, which specialises in higher risk loans to people with poor credit histories, or those on low incomes, has all but collapsed in the US.

"There remains the concern that the US experience might presage steep housing downturns in other countries that have also experienced a rapid rise in house prices, with associated risks for output growth," said the IMF.

The other European nations that the IMF says are at risk of seeing falling housing prices are France, the Republic of Ireland, Netherlands and Spain. A number of recent reports have pointed to cooling house price inflation in the UK. The Department of Communities and Local Government said earlier this week that the annual inflation rate for property fell from 12.4% to 11.4% in the year to August.

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