The Bank of England Governor Mervyn King recently said that the British housing crash has been cancelled. King said that housing activity is growing at a good pace. He was giving a speech in Birmingham, England.  How ever some analyst differ and say that as unemployment is on the rise in Britain, apart from personal bankruptcies, property is still having a bad time.

Ed Stansfield, an economist said that the market is better, but said that he’s not sure if there would be a large correction in prices. The property market of Britain generally supports the view of King.  House prices in Britain augmented by 1.3 per cent in October.  As per the Nationwide Building Society, the growth rate is the fastest in 15 months.

At one time price of houses were going up at a very fast pace in Britain. They were rising up to 25 per cent a year, at their peak.  There was a risk of inflation because of the hike in the growth rate. The benchmark interest rate went to 4.75 per cent due to an augmentation by the Bank of England.  King said in a speech that they had seen inflation till June of 2004, and after that it decreased to almost zero.  The bank was aware about the risks that were involved when it started to moderate house prices.

Stansfield said that the bigger picture hasn’t changed. He added that the valuations are still more stretched then they were since 1990. James Carrick commented that due to two factors, there’re negative views on the housing market. The first factor is the house prices. People who’re buying it first time cannot afford them. The second factor is that the rental yields have dropped down below the mortgage rate. These issues still haunt the housing market. 

Also, unemployment is on the rise in Britain.  There’re a lot of people who claim for unemployment benefits and it’s rising.  British companies are going for a cuts in costs.  There was a steep rise in declaring insolvency by the citizens of Wales and England. The reason for this is that consumers were struggling to cope with their borrowings.

Meanwhile, statistics that were made public last month proved that the number of court actions against mortgage defaulters increased to 29,991. The assumptions from these figures is that people have borrowed a huge amount of money and are now finding it hard to pay it back.  For everyone declaring bankruptcy, there’re 10 others close to the edge.

On top of it the economic growth of Britain wasn’t that great. In terms of growth league, Britain is at the bottom of Europe. King will claim credit for taking the British housing market towards a soft landing.