Wednesday 1st August 2007
The UK ranks second worldwide in terms of overvaluation of property, research shows.
Global rating agency Fitch claims that only France has more overvalued property, placing consumers at risk of entering negative equity should house prices fall.
Meanwhile, the House Prices and Household Debt study ranks the UK third in terms of personal financial risk for consumers.
Brian Coulton, head of global economics and Europe, explains: "Given record levels of household debt, rising interest rates and after several years of strong house price inflation in many countries, Fitch has assessed a range of indicators of household balance sheet vulnerabilities."
"For overall vulnerability, New Zealand ranks first, Denmark second and the UK third as the most exposed countries. Japan, Germany and Italy are the least vulnerable," he adds.
The spokesperson reveals that low levels of personal debt and overall net worth of individuals are responsible for the UK ranking lower in overall terms than on the house price criterion.
A total of 16 developed countries around the globe were analysed in the creation of the report, according to Fitch.
The study indicates a dynamically-changing housing market with "rapid house price growth including [when considered] relative to incomes and rents".
But it indicates that "housing supply dynamics - not captured in our valuation estimates - are undoubtedly playing an important role in current and prospective house price movements".
In the UK, strict planning permission processes are cited as a potential reason why supply of domiciles has failed to keep up with increases in demand since the 1970s.
Ireland tops the table for ten-year price growth, with the UK in second place, although Fitch predicts that property prices in Ireland could be set to fall in coming years.
Figures published within the report show that construction accounted for 15 per cent of the Irish economy in 2006 and that new properties are outpacing household growth.
This, says Fitch, could lead to "an overhang in inventories" and "put heavy downward pressure on house prices".
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