The property market is very close to the peak reached just before the 2008 crash, an economic forecaster has warned.
Fathom Consulting says UK house prices are now 6.1 times average earnings, close to the pre-crash peak of 6.4 times.
Fathom says house prices either need to fall by up to 40% or incomes need to grow at ten times their current price for the next five years for homes to be affordable.
Fathom is forecasting an inevitable “sharp correction” when interest rates start to rise. However, it admits this is a distant prospect and that interest rates are likely to stay on hold until at least early 2018, regardless of the EU referendum result.
It does however forecast a 5% to 10% drop in transactions if the referendum results in a leave vote.
Fathom says that “lower for longer” interest rates are inflating the housing bubble and will worsen the “inevitable correction”.