2016-08-24bloomberg.com

To outsiders, this property obsession seems a kind of collective madness... Brits' appetite for houses at inflated prices brings to mind former Citigroup boss Chuck Prince's infamous 2007 assertion that "as long as the music is playing [in terms of liquidity], you've got to get up and dance".

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Wavering prospective home-buyers are enticed by ultra-cheap mortgages, bolstered by the Bank of England cutting rates after the Brexit vote. So buying is still often cheaper than renting. And while falling interest rates raise big questions about company pension promises, buying a home at least gives you somewhere to live in retirement.

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Brits aren't mad, they're just trapped: prisoners of a system that conspires to keep prices high and houses in short supply. They know their government will do almost anything to prevent house prices collapsing. Buyers can already obtain loans from the government to help get on the housing ladder, a policy that will further inflate prices for those lucky enough to own property already. There are reports that Theresa May's government is preparing a fresh multi-billion pound housing stimulus -- albeit one that should support more development.

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Of course, it would be wrong not to look at the longer term. The pound's depreciation, the U.K.'s gaping current account deficit and relentlessly awful productivity say nothing good about the prospects for the economy. If Brexit leads to investment cuts, then jobs will go too. For now, though, British buyers will be compelled to continue their dance with the property market devil.

The pretend-wealth of highly-leveraged housing is all fun and games until prices crash (whether because of intrinsic exhaustion or the economy sputtering), and you're upside-down...



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