OECD think-tank raises alarm over UK house prices slump
02-25-2015
Warning: The OECD said the UK could be a risk from a sudden slump in house prices (Picture: Oli Scarff, Getty Images)
Russell Lynch
A sudden slump in house prices poses a potential threat to financial stability, a leading economic thinktank has warned.
The Organisation for Economic Co-operation and Development’s latest report on the UK economy comes against the backdrop of a cooling housing market, although UK house prices have still risen almost 10% in the past year.
In London, the pace of increases is even stronger still with prices up more than 13% in the year to December.
The Bank of England took action the cool off the market last year, limiting loans as a share of income, while mortgage approvals have dropped back.
The OECD warned: “Housing supply has not risen to meet demand. In addition, house prices have increased rapidly and may create risks to financial stability in the case of a downward adjustment.”
It added: “The recovery... has been marked by large house price increases, particularly in London raising homeowners’ wealth, but also reducing affordability for first-time buyers and contributing to higher household indebtedness.”
Housebuilder Persimmon is speeding up plans to return £1.9 billion to shareholders after a 44% jump in pre-tax profits to £475 million last year.