Housing Pain Continues to Spread Overseas

The International Herald Tribune reports that global sales of commercial real estate is falling:

World sales of major commercial properties fell 49 percent to $306 billion (160 billion pounds) in the first six months of 2008 from the same period last year, as sales in developed countries were hit hard by the credit crisis and slowing economies, a report released on Friday said.

And Britain is experiencing a declining housing market and a weakening economy:

In recent weeks, Britons have come to an uncomfortable realization: After 17 years of uninterrupted growth, their economy is moving closer to recession and may well already be in one. Home prices are dropping, sapping consumer confidence, and even though repossessions, bankruptcies and unemployment are still at relative lows, they have started to creep up during the last three months.

Just Thursday, figures released by HBOS, the largest mortgage lender in Britain, showed the housing market slump was gathering pace. The average price of a property fell 8.8 percent in the 12 months through July, the biggest drop since the company started to track prices in 1983.

But the Bank of England is caught in a bind. It is unable to lower interest rates to keep the economy growing because, at the same time, inflation looms. It left lending rates unchanged at its meeting on Thursday.

As a result, many economists are predicting that the situation will sharply deteriorate over the next six months, leaving Britain to face a longer, more painful downturn than the United States.