Housing slump awaiting Britain?

Is Britain next in line for a housing slump?

According to Karen Ward, the author of a report by Hongkong and Shanghai Banking Corporation (HSBC), “there is around 30 per cent of the current house price level that cannot be explained.” In other words, the prices are overvalued by 30 percent, which is a likely indicator that the British housing market is headed toward a similar slump to that which is being experienced in the United States.

The figures cite that London house prices are dropping at their fastest rate in two years – just 6 percent according to The Land Registry – but that this is an indication that the bubble is beginning to burst. A similar report filed last month by the International Monetary Fund (IMF) actually cited

The drop in interest rates is also predicted, mainly as a result of the transition from a market dictated by demand to one that is shaped by overwhelming supply. This can be seen by the fact that rent rates have remained steady, a sign that there is no true supply shortage.

There is certainly room for hope: Britain experienced a similar downturn in the early 90s, when home prices dropped by approximately 30%. The real estate market is constantly adjusting, and one can only expect that brighter times will follow.

Via Times Online