Is the 5 year war of the regulator against the hydra of the markets over now?
The recent behaviour of the real estate markets may lead to nurture some doubts.
To avoid talking about France let us focus this time on our neighbour across the Channel.
Prices of residential property are soaring again, especially in London: +8% in 2013.
Has the wealth of the households increased 8% in 2013 in this country where the gross domestic product has hardly increased by only 2%?
We may have doubts but who is the culprit?
Its name: the “House Price to Earning Ratio”.
This ratio is attaining a high of 8x in the “Greater London” which means that a household will have to set aside eight years of its disposable income before it can release the credit obligations linked to its real estate acquisition.
Should we panic?
The “Sages” amongst the economists are discovering the merits of low mortgage interest rates.
It is true that the burden of a 20 year mortgage loan with interest rate of say 3% is (much) lower than one of the same amount and of the same maturity but bearing a 9% interest rate.
But if the rates are low, aren’t they tied to the “quantitative easing” and to similar initatives set up by the central bank to ease the burden of the State debt …
And why is the State indebtedness so high nowadays ?
It looks like the result of the former crisis of the subprime
And where could it lead us to?
To another crisis of the subprime.
Dominique F. Pasquier