Conventional wisdom maintains that the bubble in UK home
prices is due to inadequate supply. Conventional wisdom is wrong. Despite tough
British planning laws, the shortage of housing across the country is not acute.
Overvaluation is largely the result of ultra-low interest rates. Low interest
rates may be with us for a while. Relative to income, house prices have never
been as unaffordable as they are today. Is a shortage in new homes to blame for
the high prices? Last year, housing completions in the United Kingdom rose to
just over 150,000. That’s 30 percent less than the average number of housing
units completed annually in the 1980s. The solution is simple, say the pundits:
Britain needs more houses. Planning regulations should be relaxed. Yet if high
home prices were really the result of shortages, more people would be squeezed
under the same roof. Read more on the Reuters website.
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