UK example of good price adjustment says OECD

Posted: 04 Dec 2006 10:27:56 GMT

House price corrections need not be destabilising or painful, the Organisation of Economic Cooperation and Development (OECD) has said, pointing to the UK

House price corrections need not be destabilising or painful, the Organisation of Economic Cooperation and Development (OECD) has said, pointing to the UK.

The UK housing slowdown of last year was an example of a well-managed adjustment it said, warning that prices in the US, Denmark, France and Spain may be "unsustainable".

Some degree of luck may be involved however, as the UK market slowed while growth and employment remained high, ensuring that the economy continued to tick over.

"History suggests that sharp housing corrections can be hard to contain," said OECD chief economist Jean-Philippe Cotis.

"It is especially so when, as a starting point, the economy is out of kilter, with both over-extended financial markets and clearly overheated product markets."

The OECD economic report added that the UK economy will continue to grow at its recent rate of between 2.5 and 2.75 per cent, "supported by buoyant domestic demand".

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