We’re not convinced recent UK house price rises will mean a stronger pound. The recovery has taken place almost exclusively in London and its south eastern commuter belt. In the rest of the country nominal house prices are only just rising and in some regions falling in real and nominal terms. Sterling TWI looks much fairer versus the latter than the former. There is good reason. Even as London drives aggregate indicators higher, this is mostly a result of foreign buying and its spillover effects. As this largely results from exogenous factors like global financial repression and political risk, monetary policy would be a very blunt tool to deal with market froth.
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Deutsche Bank