UK: Deloitte Monday Briefing: In Search Of Cheap Housing

Last Updated: 19 August 2013
Article by Ian Stewart

Most Read Contributor in UK, August 2017
  • As one of the most widely-owned and valuable consumer assets, housing has a special importance to the health of an economy. Housing activity is widely seen as a barometer of confidence. The turnaround in US housing in the last 18 months, and, more recently, the uptick in UK housing activity, have been widely seen as signs that these economies have turned the corner.
  • The last few years demonstrate another characteristic of housing. As a high-value, highly leveraged asset, housing also serves as a barometer of monetary excess and of economic imbalances.
  • So what do the latest data show about housing activity and housing valuations?
  • US house prices fell by almost 34% between their peak in 2006 and early last year, making property highly affordable by long-term yardsticks. Since this low point, they have risen 10%. Nonetheless, The Economist estimates US housing to be undervalued by 21% against incomes, suggesting that prices have some way to go before reaching overvalued territory.
  • UK housing is also showing signs of recovery. But in contrast to the US, property in the UK does not look especially cheap. Although 11% below their levels in late 2007, house prices are, according to The Economist, 11% overvalued against incomes. At £242,000, the price of an average house in the UK is nine times average annual earnings.
  • The European housing market that has most successfully ridden out the financial crisis is Germany's. Germany did not experience the boom in house prices that occurred in southern Europe and the English-speaking world. And while house prices slumped elsewhere, in Germany there have been modest increases since 2007. Having fallen by 18% relative to inflation in the last 30 years, German housing still looks significantly undervalued.
  • The housing bust in the periphery of the euro area has made houses in Ireland and Portugal cheap relative to long-term yardsticks. But in the far larger and economically significant economies of Spain and Italy, housing still looks overvalued. The core of the euro area has problems too. Prices are falling in the Netherlands and France and with valuations well above long-term equilibrium, prices may have further to fall. 
  • Japan has suffered the world's most prolonged housing bust. Since the peak in the Japanese housing market, in 1991, prices have halved, making Japan's housing cheaper, relative to incomes and rents, than anywhere else in the industrialised world.
  • One indicator of potential risk in the housing market is a combination of rising house prices and significant overvaluation. On the Economist's data, Hong Kong, Singapore, Australia, Sweden, Canada and the UK fall into this group.
  • For those with plenty of money, a long-term horizon and an appetite for risk, where does housing appear to offer the best value? OECD data show that the most undervalued markets are Japan, Germany, Ireland, the US, Portugal, the Slovak Republic, Slovenia, Iceland and Switzerland.
  • But before Googling estate agents in Osaka, Cork or Reykjavik, it's worth bearing in mind that housing valuations, like equity valuations, are a very fallible lead indicator of future price movements. Japan's experience provides a cautionary tale in how apparently cheap housing can go on getting cheaper. Meanwhile London housing may not rate as being cheap on conventional yardsticks, but it has risen in value by over 9.0% in the last year.


UK's FTSE 100 ended the week down -1.3%, weakened by healthcare equities.

Here are some recent news stories that caught our eye as reflecting key economic themes:


  • The latest A-level results revealed that the number of students taking economics has risen 50% since the recession in 2007, the fastest growth in any subject.
  • Lloyds TSB's regional purchasing managers' index for July recorded the fastest business growth in over 12 years, with growth in every region of the UK and the strongest growth in the North West.
  • The eurozone economy grew by 0.3% in Q2 2013, ending its longest contraction since creation in 1999, driven by growth in Germany, France and Portugal
    British retail sales rose in July at their fastest rate in two-and-a-half years, driven by the longest heatwave in more than 15 years.
  • Data from the Office for National Statistics (ONS) showed household energy use in England and Wales fell by 24.7% between 2005 and 2011, due to rising costs and improved household efficiency measures.
  • Norway's market share of salmon exports to China has fallen from 92% in 2010 to 29%, following the October 2010 decision of a Norwegian committee to award the Nobel Peace Prize to Chinese dissident Liu Xiaobo.
  • The numbers of Romanians and Bulgarians working in the UK rose by more than 25% in Q2 2013 compared to the previous quarter.
  • US retailer Walmart reported a second consecutive quarter of falling sales in the US and cut its forecast for global sales growth in 2013.
  • British cigarette firm Imperial Tobacco announced plans to launch its first e-cigarette in 2014
    The number of Chinese millionaires rose by 3% annually in 2012, the slowest rate of growth in 5 years, according to survey data from the independent Hurun Research Institute and consultancy GroupM Knowledge.
  • Cinema chain Cineworld announced a 24% increase in profits in the first half of 2013, with 2m filmgoers having registered for the firm's loyalty scheme after online booking fees were abolished.
  • Fracking company Cuadrilla temporarily suspended operations in the village of Balcombe following protests from anti-shale campaigners.
  • A technical indicator of stock market vulnerability called the "Hindenburg Omen" has appeared 11 times in 50 days recently according to analysts at Sundial Capital Research.
  • Online retailer eBay launched a new service to enable shoppers to provide detailed information about their historical shopping habits to high street retailers when they walk in to a store
    India's food price inflation rate rose to an annualized rate of 9.5% in July, driven by a 34% monthly rise in onion prices, which were hit by excessive rains.
  • French cosmetics firm L'Oreal made a £540m takeover offer for Chinese skincare company Magic Holdings.
  • US home appliances firm Whirlpool agreed to buy a 51% stake in Chinese appliance maker Hefei Sanyo for $552m.
  • A Chinese zoo in the city of Luohe has substituted lions and wolves for Tibetan mastiff dogs and foxes for leopards in an apparent cost-cutting exercise – beasts of burden.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.