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You can find the current article at its original source at https://www.theguardian.com/business/nils-pratley-on-finance/2017/mar/07/uk-house-prices-slowdown-market
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| UK house prices were rising too fast – bring on the slowdown | UK house prices were rising too fast – bring on the slowdown |
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| Encouraging news from the housing market: cooler winds are blowing. The rate of growth in prices fell in February to the lowest for three-and-a-half years, according to the Halifax’s index. This development may not delight homeowners looking to sell in a hurry but, for anybody with a wider or longer perspective, a slowdown is exactly what the UK needs. | Encouraging news from the housing market: cooler winds are blowing. The rate of growth in prices fell in February to the lowest for three-and-a-half years, according to the Halifax’s index. This development may not delight homeowners looking to sell in a hurry but, for anybody with a wider or longer perspective, a slowdown is exactly what the UK needs. |
| Annual house price inflation a year ago had reached the silly level of 10%, far too fast for an economy growing at about 2%. A correction was overdue and the steady decline to 5.1%, down from 5.7% in January, restores a degree of sanity. A rate of 5% is still too high given that average earnings are currently growing at 2.5%, but most economists think house price inflation should slow to 2% by the end of this year. Bring it on. | Annual house price inflation a year ago had reached the silly level of 10%, far too fast for an economy growing at about 2%. A correction was overdue and the steady decline to 5.1%, down from 5.7% in January, restores a degree of sanity. A rate of 5% is still too high given that average earnings are currently growing at 2.5%, but most economists think house price inflation should slow to 2% by the end of this year. Bring it on. |
| To see why, look at Halifax’s ratio of house prices to earnings, as reliable a guide as any to affordability, froth and danger. The current level is about six times (pdf), which was last seen in 2007, just before the banking crash and recession. If 10% house price inflation had continued, the UK would have been heading into dangerous waters. | |
| The Bank of England’s monetary policymakers, already fretting about the rise in unsecured credit card debt, should be relieved. Their working plan this year and next, one assumes, will be to keep interest rates at ultra-low levels and ignore the inflationary effects of the 15% fall in the pound against the dollar. | The Bank of England’s monetary policymakers, already fretting about the rise in unsecured credit card debt, should be relieved. Their working plan this year and next, one assumes, will be to keep interest rates at ultra-low levels and ignore the inflationary effects of the 15% fall in the pound against the dollar. |
| It is a sensible plan to address the Brexit uncertainties, but it is horribly exposed to the risk of a house price bubble fuelled by cheap money. If that risk is receding, the Bank has a freer hand and the Brexit obstacle looks slightly less daunting. | It is a sensible plan to address the Brexit uncertainties, but it is horribly exposed to the risk of a house price bubble fuelled by cheap money. If that risk is receding, the Bank has a freer hand and the Brexit obstacle looks slightly less daunting. |