Property 'overvalued by 20%'

30 January 2006
The British property market is overvalued by 20 per cent, according to a new report.

High demand, low interest rates and limited supply have all combined to create this overvaluation of house prices, the National Institute of Economic and Social Research (NISR) warns.

It also argues that house price growth is boosted by the "favourable tax treatment of owner-occupied housing", in which wealth is transferred between those that own property.

These findings form part of the institute's newest quarterly assessment of the UK economy, which it predicts will stage a revival in 2006 and grow by 2.3 per cent compared to 1.7 per cent last year.

A growth in investment, government consumption and household spending will all fuel this growth, according to the institute.

The NISR report is roughly in line with the chancellor's prediction that the economy will grow between two and 2.5 per cent this year.

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