Merrill Lynch crunches UK housing
Mark Hake, an analyst at Merrill Lynch, says the British housing market could take 20 years to recover from its current downturn.
Merrill, one of the City of London’s leading investment banks, said, in a note to clients, ” … it looks significantly worse [than the 1990 downturn], with house prices falling faster and further and very little recovery in real terms expected over 20 years. … House prices are expected to be below their August 2007 peak in a further 10 years’ time.”
The bank forecasts house prices to fall by as much as 17 per cent this year, while inflation is set to continue its upward march in coming months as the economy absorbs the effects of higher oil and food prices.
To add to the woes, David Kern, economic advisor to the British Chambers of Commerce, thinks unemployment will rise to nearly two million by the end of 2009. He commented, “The results of this survey signal a menacing deterioration in UK prospects We are now facing serious risks of recession. London appears pretty weak and it’s across the board. Businesses are in a lose-lose situation. Falling demand and the squeeze on consumer disposable incomes will limit how far prices can be increased.”


Around the world, government and central banks are thinking less about the possibility of deflation and increasing turning their attention to inflation.