In common with the UK, house prices in Australia have also staged a surprising recovery this year. Both markets suffer from structural housing supply shortages, so this could suggest that we are being too dismissive of the rebound in UK house prices. However, in both cases, rising prices could equally reflect the favourable, but temporary, combination of an improving economy and ultra-low interest rates. In our view, it is too soon to conclude that the correction in either market is over.
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