- Organisation for Economic Co-operation and Development
The U.K. is now one of the fastest developed economies in the world. The growth is mostly backed by a booming housing market and a decline in savings rate. House prices are constantly rising, while analysts are warning about the growing bubble in the housing market. While the government sees only subdued risks, soon the property market can become the Achilles heel of the U.K. economy.
This week the OECD warned British government should act in order to curb mortgage lending or the recent surge in the demand for property that could see house prices spiral out of control. According to the OECD, the government should reduce the earlier implemented schemes like Help to Buy or forces borrowers to raise higher deposits. Otherwise, the market can quickly overheat. While the organisation has revised the growth outlook for this year and 2015, suggesting the economy will overtake the U.S., they have also warned that in case the government refuses to act, the current conditions will quickly inflate a house price bubble.
Another worrying sign is the number of the ageing buildings and infrastructure in the U.K., which could cause a decline in the pace of growth. The country is facing risks of enduring problems due to the quality of the ageing infrastructure. Currently, revenues made from built assets are equal to 28% of the nation's GDP.
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