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Housing market a ‘bubble on a bubble’, as experts warn prices could be overvalued as much as 12pc

Experts have warned the UK housing market is a “bubble on a bubble” as new figures reveal that property prices could be overvalued as much as 12pc.
A housing bubble could burst in the next recession after being inflated by government and Bank of England policies, Societe Generale global strategist Albert Edwards told The Telegraph.
Property prices hit a new record high in July after surging over 50pc in the last decade.
His warning came as the International Monetary Fund estimated that prices in some of the world’s largest economies, including the UK, may be overvalued by an average of 12pc.
The average house price in Britain reached a new high of ?230,280 last month, Halifax data indicated. A correction in prices would see the average UK home lose almost ?30,000 in value.
Housing market a ‘bubble on a bubble’, as experts warn prices could be overvalued as much as 12pc

Societe Generale's 'uber-bear' Albert Edwards has warned the property market is in danger

Credit:
Paul Grover
Mr Edwards said that a decade of loose monetary policy on Threadneedle Street and the Help to Buy scheme have inflated prices beyond the reach of many buyers.
“What you are doing is lending them more money backed by the taxpayer to push up house prices even more,” he said. Mr Edwards explained that while US property prices corrected back to normal levels following the financial crisis, the UK market has become a “bubble on top of the previous bubble”.
Economists at the world’s lender of last resort also blamed ultra-low interest rates imposed following the financial crisis for fuelling cheap borrowing and therefore boosting demand.
Chart: Average UK house price over the past 25 years
The IMF report argued a policy that controls rents “tends to raise house prices” – a policy mooted by the Labour Party at the last election. It explained rent restrictions “can create ‘lock-in’ effects where renters remain in space that may exceed their needs”, reducing the overall supply of housing.
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