U.K. economy could be endangered by overheating housing market

Note: This section contains information in English only.
Source: Dukascopy Bank SA
"We have this potentially destabilizing impact of the housing boom, and we have other issues like currency moving into overvaluation territory, making it more difficult to rebalance"
- Vince Cable, British Business Secretary


British Business Secretary Vince Cable has warned that the Britain's economy remains on "life support system", while overheating housing market could endanger the economic recovery. The business secretary also underlined the need to be realistic about the country's economic prospects, emphasizing that underlying problems are posing a threat. The U.K.'s housing prices have dramatically surged by over 10% in the year to July, with economists forecasting that the prices will continue to rise another 8% this year. The Organization for Economic Cooperation and Development (OECD), the International Monetary Fund and other economic think tanks have all expressed concerns over the possibility of a house price bubble in the U.K. Nevertheless, British Prime Minister David Cameron has, dismissed suggestions of a house price bubble, saying there was "no evidence" that the market was unsustainable. Britain's housing market collapsed in 2007, causing one of the worst recessions in the country's history.

Meanwhile, some positive news came from the manufacturing sector, where worker are getting paid more, in a sign that wage growth, a missing component of the U.K.'s recovery, is starting to increase in some parts of the economy. The average annual pay settlement in the sector was 2.6% in the six months to July, compared to 2.4% a year ago.


© Dukascopy Bank SA

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