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Bank of England issues property price warning

25 January 2005
A top member of the Bank of England's interest-rate setting Monetary Policy Committee has said she believes property values are set to fall.

Kate Barker said that while the value of predicting single asset prices was questionable, a drop in house prices is still the most likely outcome.

"In view of the evidence on affordability, and the balance of arguments about overvaluation, the likelihood of some decline in house prices, at least relative to earnings, seems now to be much greater than that of a further significant increase," she said.

Additionally, she warned that falls in prices over the last three months are set to continue.

"Past experience suggests that house price movements in one direction over a quarter are more often than not followed by a further change in the same direction."

Ms Barker went on to say that a small fall in house prices was "only one of a wide range of possibilities", particularly as asset prices can spend large amounts of time far higher, and lower, than their fundamental values.

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