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The Harvey files 2: housing market part 1

By Harvey Cole  

The first law of bubbles is that they burst. It may take much longer for them to do so than anyone expects, but in the end, they do.

It is a matter of simple arithmetic that house prices cannot continue increasing at the same rate—or anything like it—as in recent years. Since 1992 house prices have more than trebled. That is an average annual increase of 8.1 per cent. Over the same period incomes have not quite doubled.

The average house now costs approximately £200,000. Average earnings are around £25,000. That gives the much quoted statistic that a home costs…

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