- 05
- Mar
It is difficult for the average UK consumer to understand how the price of gold can affect the price of a house in the suburbs. However, the price of a home in the UK is based on sterling. The value of a home is measured in gold.
Recent markets have published reports that strengthen the predictions that the housing market will continue to grow over the next few months, even years. In fact, when using gold as a measurement, the housing market can double before it hits the levels seen in 1990.
The Bank of England masks the effect of the money supply inflation, which is at an incredible 14 per cent, then the government can keep printing more and more money to keep the illusion of strong growth continuing.
However, at some point a crunch point will hit. Interest rates will increase to push down inflation. This has started in recent months with interest rates increasing to 5.25 per cent in response to CPI hitting 3 per cent.
This is a short-term economic factor, which historically does not have a dramatic impact on the housing market unless it spirals out of control.
The economy continues to produce strong growth as the UK benefits from EU expansion. The influx of cheap labour and in investment opportunities generating earnings for UK Business.
A consequence of EU expansion is a strong economy and liberal employment laws which translate into higher wages for professionals. Migrant Labour in the UK is in excess of 800,000. This supports the demand for properties in the buy to let market, which has driven a large percentage of the housing market, almost creating a secondary market.
Add this to a lack of supply of new buildings, has caused the demand to strip the supply, and analysts predict that it will remain strong through 2007 and into 2008.
The UK housing market will be supported due to housing still not having reach unaffordable levels like those experienced in the past.
