Page last updated at 19:47 GMT, Wednesday, 17 October 2007 20:47 UK

UK house prices 'at risk of fall'

For Sale signs
A number of reports have indicated slowing house price rises

Britain may be facing a fall in house prices similar to that currently being endured in the US, the International Monetary Fund (IMF) has warned.

The IMF says there is evidence to suggest that the UK and a number of other European nations are also vulnerable to a price correction.

It points to the fact that UK house prices have risen far higher than incomes over recent years.

But, it adds, a lack of supply could continue to hold up UK prices.

The IMF also says that the UK and other western European housing markets are in a better state than that in the US, because they have generally avoided the sub-prime mortgage industry.

This sector, which specialises in higher risk loans to people with poor credit histories, or those on low incomes, has all but collapsed in the US.


"There remains the concern that the US experience might presage steep housing downturns in other countries that have also experienced a rapid rise in house prices, with associated risks for output growth," said the IMF.

The other European nations that the IMF says are at risk of seeing falling housing prices are France, the Republic of Ireland, Netherlands and Spain.

A number of recent reports have pointed to cooling house price inflation in the UK.

The Department of Communities and Local Government said earlier this week that the annual inflation rate for property fell from 12.4% to 11.4% in the year to August.

The Halifax said it saw the same picture in September.

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