Bank of England governor Mervyn King has warned house prices are in serious danger of falling while home owners will almost certainly face higher than expected borrowing costs.
The statement, carried in today’s FT suggests house prices will start to slide because “it is clear that the chances of falls in house prices are greater than they were,” according to Kind’s own words.
In particular, price to earnings ratios are “well above what most people would regard as sustainable in the long term.”
The Times says King’s view has met with a “more sanguine” view from government quarters, where the view is “experience of the Netherlands and Australia, which, after steep and sustained price rises, later returned to more gentle trends without a property crash.”
The paper quotes too figures from estate agents and the Royal Institute of Chartered Surveyors showing housing sales slipped in May, with a record low number of first time buyers and expectations in the trade of a “static” market through the rest of this year.
HOUSE PRICES ARE not the only problem facing the Bank of England following yesterday’s announcement by OPEC’s president Purnomo Yusgiantoro’s statement that oil prices are set to rise again.
The Daily Telegraph reports high energy prices have already pushed UK factory gate prices up, and political unrest in the Middle East could send prices higher still.
Stripping out oil prices shows UK inflation is relatively benign at present, but higher fuel costs are going to have to be passed on to consumers in the end, which will push up inflation, the paper quotes economists.
A NEW CODE OF conduct is the government’s answer to boosting investor confidence in long-term savings, reports The Times today.
The strategy will be outlined today by Richard Sykes, former chairman of GlaxoSmithKline and now special adviser to the government on the issue.
He is expected to outline an “oath” that banks, insurers and listed companies should be expected to take, along the lines of the Hippocratic oath, as the “last hope” for encouraging greater savings in the UK.
IN BRUSSELS, THE European Commission received a bloody nose yesterday with news four member states, France, Italy, Belgium and Spain, have lined up against new international accounting standards being discussed.
The stand means the EU is unlikely to have in place new IASB rules in time for the deadline of January 2005, the FT says.
Problems have arisen because of IASB 39, a rule on how banks should account for derivatives-based business. The four countries mentioned seem to have accepted banks’ arguments that the rule would result in unfair measures, and the EC will be politically unable to move forward on the issue unless they can be won over, the FT adds.
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