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Page Updated November 6, 2007

Where are the UK and US housing markets going?

What does the future hold for the UK and US housing market? The following are extracts from an article published by the BBC here.

'UK may avoid US-style housing pain'
Analysis
By Julian Knight
Personal finance reporter, BBC News, Wednesday, 6 September 2006, 23:00 GMT 00:00 UK

The once-mighty US housing market seems to be on the slide.
Optimism among US house builders has fallen to its lowest level in 15 years, the latest sign that a formerly booming market has now slowed sharply. Sales are down and interest rates are up, classic signs of a market going into reverse. Since the UK is seen as tending to follow the economic and cultural lead of the US, is the UK housing market now set for a serious downturn?

Surprising strength
UK house price growth has exceeded all the major forecasts. In the past month, the Halifax and Nationwide have both upped their forecasts for price growth during 2006. "The strength of the UK housing market has been a surprise," Mr Archer said. "I and many others thought 2006 and beyond would be flat in terms of house price growth. "Although house prices to earnings ratios are high, mortgage repayments are still affordable for most." For a long time now, the UK housing market has been confounding the doomsayers. In 2003, the respected Capital Economics grabbed the headlines when its chief economist Roger Bootle stated that the UK market was overvalued and would fall by at least 20%.

Three years on, although price growth has been sluggish in some areas - most notably East Anglia and the south-west of England - there has been no price correction. As a result, Capital Economics has now moderated its forecast. The consultancy still suggests that prices are overvalued, but that the price correction will be less dramatic - more a slow, steady fall in prices, rather than a crash.