Save, Invest . . . Get Ready for Crunch ; John Heffernan Looks at the Debate On House Prices and Their Link to the Wider Economy

Summary

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TODAY being Ash Wednesday and the start of Lent is a good one to tell you about this week's Three Wise Men and the views they hold on the future of house prices. The Three Wise Men in question are all economists and the views of two of them were aired in a debate at the RAC Club in London's Pall Mall.

The future trend of house prices concerns all of us, even those who are not home owners. If house prices were to collapse then the remortgaging boom (which has been the key impetus behind the growth in consumer spending accounting for between 5% and 7% of the total) would be switched off like an electric light. And that would hit share price performance as well as Mr Brown's budget calculations.

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Extract

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Save, Invest . . . Get Ready for Crunch ; John Heffernan Looks at the Debate On House Prices and Their Link to the Wider Economy

Wise Man No 1 is Roger Bootle, head of consultants Capital Economics and former top economic guru for the HSBC and now also visiting professor at Manchester Business School. Bootle is a "hard- landing" man and believes house prices need to drop 20% to correct the market's over-valuation. That compares with a peak-to-trough fall of only 13% in the early 1930s and the early 1990s, the only two occasions in the 20th centu...

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