UK economy ‘may be particularly vulnerable in global housing slump’

The UK could find its economy particularly badly hit in the event of a global housing slump, analysis suggests.

High property valuations and strong recent housing investment are two key factors that can leave countries vulnerable to housing downturns, according to analysis firm Oxford Economics.

It said that among a sample of OECD countries, the most vulnerable, with high house price valuations and high recent rates of housing construction, looked to be Sweden, Norway, New Zealand and Canada – followed by Australia, the UK and Denmark.

Large economies such as the US and Germany also looked relatively low risk, it said.

Lengthy housing market upturns are seen as another risk factor, which may make a downturn more likely as time goes on.

The report said the UK was among the countries which had seen particularly long upturns.

But it said numbers of house sales in the UK were well below peak levels seen a decade or so ago, and “more worrying” might be economies such as Canada, Sweden and Norway where transaction levels looked relatively high.

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