Housing Market Recovery
In an interview broadcast yesterday, Mark Carney stated that the UK's housing market is experiencing a widespread recovery. At the two ends of the spectrum, prices in the London housing market are increasing at 10% per annum, whilst the N. Irish housing market is still in the doldrums, with prices half of what they were in 2007 and 9% below 2005 prices. However, cheerleaders for the N. Irish housing market disagree - click here. The data for N. Ireland is here .
Why is the housing market recovering? According to Carney, it is not due to low interest rates and cheap credit (but he would say that, of course); rather it is due to foreign capital coming into the country and into the London market in particular.
Is this recovery good news for the economy? The Bank of England and UK Government want house prices to recover because it helps banks, property developers and households strengthen their balance sheets. However, it was a frothy and over-priced housing market fueled by cheap bank credit which got the economy into trouble in the first place.