As I have written about recently on a few occasions (see here), UK Coalition Government has purposefully re-inflated the giant credit bubble to give the impression that the country has turned a corner. After suffering the worst economic collapse since the 2nd World War our glorious leaders have put us back on the path to growth and prosperity - balderdash, nonsense, gibberish !!
The UK Telegraph takes up this subject today with (click link for full article)….. Then below this article we have the famous UK Property Bubble.
The UK, though, uniquely among the world’s big economies and despite our latest growth spurt, has yet to make up lost ground. Over five years on from the credit crunch, our economic output remains 1.3pc below 2008 levels, with manufacturing 8.2pc lower and construction output, incredibly, still 11.2pc adrift. So our recovery is far from balanced – and with financial services and real estate roaring, while manufacturing and construction languish, the imbalance is getting worse.
In “After Osbrown”, an important new pamphlet from Politeia, the free-thinking Tory backbencher Douglas Carswell makes the point that each of the four periods of sustained economic contraction experienced by the UK since the early 1970s has been preceded by an unsustainable credit-induced boom which then went wrong
We’re now making the same mistake all over again, argues Carswell, with the Tory-led coalition, for all its “austerity” rhetoric, following the same road of high government borrowing and excessive credit stimulation that Labour took under Gordon Brown. “We test to destruction the idea that cheap credit can make us rich,” writes Carswell. “Sooner or later, Osbrown economics will not only fail, but will be recognised as having failed.”
Carswell is no lightweight, back-bench malcontent but an increasingly influential voice both inside and outside Parliament. There is, to my mind, a great deal in what he says. The recent slew of data, despite the rosy headlines, does suggest this is an unbalanced, unsustainable debt-fuelled upswing. Along with our deteriorating current account, consider that UK household debt just reached a record £1,430bn, higher than it was prior to the credit crunch. Yes, car sales have grown over the last few years, but three quarters of them were financed with borrowed money.
Now the EY Item Club have put out a report that the Greater London area has an enormous ‘property bubble’. Well blow my socks off or No Shit Sherlock !!
As far as I am concerned all you have to do is look at the data, according to Nationwide’s (most conservative numbers out there) , Greater London area is now dealing on a price multiple average of 9.8 (historical average being 4.8). All I personally need to know is that number to know if property is cheap or extremely overvalued !
Day of Reckoning is not with us yet and will not likely capitulate until after the UK general election in mid 2015. Good Luck - Mitch
London shows signs of house price bubble experts warn (full article click the link)
The Bank of England must be “prepared to take action” on housing market controls amid fears that London is beginning to show “bubble-like conditions”, according to new research.
The average house price in the capital will rise to £600,000 by 2018, experts predict in a report released on Monday by economic forecasters the EY Item Club.
The cost is 3.5 times more than the average house price in Northern Ireland and over 3.3 times the average in the North East.
The research also revealed that income multiples are now back to pre-crisis levels in London as homeowners take on increasingly expensive mortgages.
During the past year, house prices in London have increased at more than double the rate of the rest of the UK to an average of £403,792, according to recent Land Registry figures.
The Item Club said that it favours intervention over the introduction of higher interest rates, so the Bank of England’s Financial Policy Committee (FPC) would need to be involved in any preventative action.