The only solution may be a crash

13-17 April Weekend Australian financial Review reports:

UK housing crisis
by Jill Ward

The solution to Britain's housing woes may not be pretty.

Staggeringly high prices, which are preventing many Britons from buying a home, may be corrected by a market crash, according to economists from the University of Reading. While many say boosting the supply of property for sale would help with affordability, the academics say the effect would be very limited, because the amount of building needed just isn't feasible.

"Permanent increases in construction would be required that have never been achieved in history," says a research paper to be presented at the Royal Economic Society's annual conference this week.

According to their model, "price-to-income ratios are likely to stabilise even without major increases in supply, although adjustment could take the form of an undesirable market collapse".

Average home values are about 7.6 times annual earnings, up from a ratio of 3.6 times 20 years ago, according to data fro the statistics office. During that period, house prices have more than tripled, far outpacing growth in incomes.


Multifocus Properties & Finance note: We feel you could just change the word Britain to Australia and the rest of the content would still apply!