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July 31, 2007

Property prices in the UK are second most overvalued

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by Elaine Frei

Property prices in the UK are second most overvalued

According to the ratings agency, Fitch, property prices in the UK are the second most overvalued, coming second only to France. The study uses a mix of how overvalued house prices and the exposure of households to increasing interest rates.

In addition, the study shows that in all but 2 of the countries surveyed, the ratio of house price growth to increases in incomes is above the long-term average. Only in Japan and Germany are the ratios within the long-term average.

The UK has experienced a property boom in the last 10 years and a mixture of a buoyant economy, lack of new housing and historically low interest rates keeps driving prices higher.

According to Fitch, increasing property prices have left Britain as the 3rd most vulnerable of all the economies to an adverse economic shock. However, Denmark and New Zealand and are more exposed than Britain.


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