More grim news from the IMF for UK house buyers

The International Monetary Fund warned that Britain could be heading for a housing market crash and urged Gordon Brown to curb spending growth.

In its latest bi-annual report, the world financial watchdog said UK property prices appeared elevated and "could come under pressure in a rising interest-rate environment".

The International Monetary Fund said that house prices are ‘overvalued by most conventional measures’ – raising the spectre of a damaging slump in the market.

To combat a significant downturn, the IMF warned yesterday that interest rates should be increased from the present 4.75% It said house prices ‘still look elevated, and could come under pressure in a rising interest rate environment’.

On the USA it added: "The US housing market could cool more rapidly than expected, triggering a more abrupt slowdown of the US economy."
 The Fund forecast that cooling housing markets would slow the US economy next year from an expected 3.4% this year to just 2.9%.

According to the IMF, the situation in America should lead to a slowdown in the global housing market, but British figures seem to be reporting otherwise.

Meanwhile, a survey within the UK by the Royal Institution of Chartered Surveyors (Rics) reported that 35 per cent more of their members reported a rise than a fall in August, up five points from the previous month. Furthermore, buyer enquiries have risen by their fastest pace since September 2003.




Ian Perry, Rics spokesman, said: "Septembers interest rate freeze will mean that the housing market will maintain its current positive momentum. Would-be buyers have been encouraged by a strong economic performance, but additional rises in interest rates before the end of the year, could deter buyers as more pressure builds on personal finances. Further rises in house prices will prevent entry into the market."


The Business News Source has repeatedly called on the government and the Bank of England in the UK to focus on the impending crisis in the UK housing market.

As we’ve stated before it will be those who have borrowed heavily and bought in the recent year who will be most affected if a crash occurs.

The time for a ‘soft landing’ is unfortunately well past. The best the government can hope is that the decline is stedy and not rapid.

Clearly, Tony Blair won’t want house price crashes to spoil his last few months as Prime Minister, so it’s likely that the government will unwillingly precipitate the crash by not doing the ‘right thing’ now.