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IMF predicts price correction

An International Monetary Fund report predicts a significant correction to UK pro- perty prices, which it claims are overvalued by 25% to 30%.

The IMF’s World economic outlook 2008 published last week states spiralling growth during the past 10 years has left the housing market wide open to a correction.

The report also states that the severity of the correction could be balanced by low levels of residential in- vestment during the past 10 years, despite the strong growth in prices.

John Goodall, private client research analyst at WH Ireland, says this is a positive development for the market as pricing has been a barrier for many potential buyers.

He says: “Rising house prices are seen as a good thing but this is a misconception. Even if the value of your home goes up it means little because if you want to move up the housing ladder, the prices of more expensive properties have also risen.

“I think a fall to normal levels will be good news – the excesses of years of easy credit will finally be reflected.”

He adds: ”Affordability will ease for many and younger people who have been putting off buying homes and starting families will finally be able to afford such lifestyle changes.”

Fionnuala Earley, chief economist at Nationwide, says: “We think that now is a good time for the housing market to pause as continuous rises are unsustainable.

“Nevertheless, the IMF report acknowledges that it cannot account for local factors like inward migration that are particularly relevant to the UK market.”


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