Bad Times in Britain?
Calculated Risk highlights some bits of bad economic news that has come out about the British economy in recent days. Recent declines in retail spending and manufacturing production seem to have sparked a wave of economic gloom in the British media.
Today CNN/Money adds fuel to the fire of pessimism about the British economy… and draws some obvious parallels with the US:
Homes: U.K. went cold; U.S. could too
U.S. homeowners can learn a lot from the housing slowdown in the U.K. market.
SALEM, Ore. (CNN/Money) – Americans aren’t the only ones who’ve gotten rich off real estate. In fact, home price gains in the United Kingdom dwarf those of the United States. Between the fourth quarter of 2000 and 2004, U.K. home prices increased 88 percent, on average, according to the Halifax house price index…
Then, with little warning, the market cooled.
“[The housing market] was rising at a 20-percent annual rate and then suddenly stopped in its tracks,” said John Calverley, chief economist and strategist of American Express Bank in London and author of “Bubbles and How to Survive Them.”
While economists disagree on whether the U.K. is experiencing a temporary lull or the beginning of a housing bust, buyers there seem to be waking up to the idea that double-digit price gains can’t last forever. Prices overall have been flat, with small increases in some areas and declines in others.
Note that the run-up in house prices only seems more extreme in Britain if one compares it to the change in average prices for all of the vastly-larger United States. If one compares similar-sized areas, such as Britain with California, or Britain with the Boston-Washington corridor, then the appreciations in the US in recent years look very comparable to those in Britain. Whether the end of the boom will also resemble Britain’s remains to be seen, of course…