Moody’s warns of threat to UK economy from house price drop

Chris Papadopoullos
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RATINGS agency Moody’s yesterday warned that the UK’s housing market posed a significant risk to the economy.

Reviewing 50 episodes of house price declines, Moody’s analysts found that they were typically associated with a six per cent loss in GDP.

It said that low interest rates, rising populations and slow construction had contributed to house price rises. UK annual house price growth was 7.2 per cent in February, according to the Office for National Statistics.

A downturn in house prices could be caused by a rise in interest rates from record lows to historical averages, or economic slowdowns accompanied by increases in unemployment.

“Large corrections in property values tend to trigger or aggravate economic downturns, having a negative impact on the creditworthiness of sovereigns and other issuers,” the company said.

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