Britain may be at risk of house price crash, says IMF

Britain could see a sudden crash in property prices, the International Monetary Fund has warned.

The IMF said the housing market in Britain was over-priced, and susceptible to the effects of the credit crunch in the international financial market. However, the IMF’s World Economic Outlook also gave reason why a US-style housing crash was unlikely to happen in Britain.

It said: “Housing markets in western Europe have generally avoided sub-prime mortgages. Second, a number of country-specific factors, including strong immigration and supply constraints, are likely to continue to support housing sectors in particular national markets.”

At the same time, the World Economic Outlook warned: “Housing markets have boomed in a number of fast-growing countries, most notably Ireland, Spain and the UK, with rapid price rises and sharp increases in residential investment relative to GDP exceeding even those observed during the US housing boom.

“A number of advanced economies’ housing markets outside the United States could be vulnerable to a correction.”

The report was released just as the chancellor Alistair Darling prepares for his first IMF meeting.

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