Up homes overpriced by 30%

| April 4, 2008 | 0 Comments

A report published this week by the International Monetary Fund (IMF) suggests that UK homes are overvalued by 30%.

The organisation believes that the UK property market is in danger of collapse after a decade of high inflation.

The IMF’s World Economic Outlook report describes the market as having experienced one of the world’s “largest unexplained increases in house prices”.

The analysis identifies a “house price gap” which is based on the difference between the cost of a home and UK economic fundamentals, such as salaries, interest rates and population growth.

Should the market fall by 30%, the price of an average UK home (currently at £196,000) would revert to £137,000.

For homes in the South East, typically worth £400,000, the drop will be even more marked, down to around £280,000.

Meanwhile, the bank of Bank of England has warned that the mortgage shortage will worsen in the second-quarter of this year.

The number of mortgages available has declined 70% since the liquidity shortage in the money markets became evident last summer.

Lenders are withdrawing their most competitive mortgages at an alarming rate, with some closing their doors to new customers.

According to the financial information website, Moneyfacts, there were 4,754 mortgage deals available at the start of Thursday of this week. By the day’s end the number had fallen to 4,329.

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

Visited 1870 times, 1 so far today