Housing lender Nationwide reports its house price index fell 1.7% m/m in Sept for a 12.4% drop y/y, the steepest y/y since 1991. It’s the 11th month of decline. On the quarter-by-quarter basis, house prices are down 4.6% in the latest quarter. But the price drop is stabilizing, not accelerating. The Nationwide economist told the FT “that current conditions were in stark contrast with those of a year ago, when UK house prices were rising at an annual rate of 9 per cent and nearly 40 per cent of first-time buyers were borrowing more than 100 per cent of the purchase price of their home.” But long-term cycles do exist in housing. She said “Price movements from the peak to a trough of a cycle simply show the extent of the volatility in prices around the trend rather than anything more meaningful about their future path.
The long-run trend growth in real house prices in the UK is around 2.7 per cent per annum and there is no reason to expect that over the longer term house prices should not continue to go up in real terms, even if we are going through a sharp correction now.”
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