IMF warns over UK property crash

By: Sarah_Jones

A sharp rise in interest rates could trigger a slump in house prices, which are overvalued by "any conventional measure", the International Monetary Fund warned yesterday. The world's chief financial watchdog warned that soaring prices posed one of the biggest risks to the UK economy.

"House prices in Spain, Ireland and the United Kingdom still look elevated, and could come under pressure in a rising interest rate environment," it said.

The fund's warning came as the Royal Institution of Chartered Surveyors revealed that house prices in the UK are now growing at the fastest pace since May 2004 as house prices accelerated for the fifth month running in August. The balance of surveyors reporting price increases in the past three months climbed to 30 per cent in August from 24 per cent in July.

The IMF also said the chances of another rate rise were "delicately balanced" and urged Gordon Brown to use next year's three-year spending review to cut expenditure to prevent a crisis in the public finances.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.