Keys Corner

The UK house-price bubble expanded again in April by 4,5%, The Guardian reports today.

As Liberal Democrat Treasury spokesman Vince Cable says:

“Rising lending by banks and building societies is recklessly fuelling the housing boom.

“Large numbers of people are gambling on the house price boom – a gamble they may regret if house prices start to fall or interest rates continue to rise. First-time buyers are increasingly being priced out of the market, making the house price bubble even more precarious. It is time the Government took action to protect ordinary homeowners against irresponsible lending.”

The Economist has been predicting that property price bubbles in the UK, Spain, Australia and the USA will burst soon for the last two years and expresses similar sentiments in its story last week, reporting that the Australian property bubble looks as if it has just started to burst in the last quarter and has further to fall than the 8% – 13% experienced so far. A fall in house prices is likely to be considerably more damaging to the respective local economies than a fall in the value of stocks and shares, because people have more equity tied up in property than in the stock market.

The Economist is predicting a 20% fall over 4 years for Australia, 25% in Holland and the UK, and 30% in Spain. Germany and Japan should have no problems on this score, as house prices have been dropping in both countries for decades.