Is the rise in house prices becoming a concern?

It is an under-statement to say that house prices have weathered the pandemic well; housing markets are positively booming. Yet the drivers of this rise in prices are rather different to those of the pre-2007 housing boom, meaning that we do not seem to be heading for a repeat of the housing-driven financial crisis of 2007/08. Nonetheless, there are pockets of concern, and we would get more worried if it looked like interest rates were about to rise sharply.
Vicky Redwood Senior Economic Adviser
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First thoughts on B.1.1.529

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CE Spotlight

Will a post-pandemic surge in demand fuel inflation?

Demand was always likely to rebound strongly as economies re-opened and confidence returned. Beyond this, though, there are reasons to think that we could now be in for a period of sustained strong aggregate demand in developed economies. Initially, this will be soaked up by spare capacity. But demand might stay strong even once economies return to full employment, potentially fueling inflation. This risk looks highest in countries which have seen the biggest policy stimulus and the smallest amount of pandemic-related economic damage, with the US most obviously fitting the bill.

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The difficulties of capturing productivity improvements

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Global migration to bounce back

Global migration has ground to a halt over the past year or so, but we doubt that the pandemic will have any major lasting impact. Moreover, there is potential for migration to get a fresh impetus from a big rise in the number of people leaving Africa over the coming decades. This could help to mitigate the problem of ageing populations in developed markets, although countries will continue to display varying degrees of openness to immigration.

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