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A major economic organisation is sounding the alarm on the global property market

Jan 3, 2017, 15:15 IST

The scene where properties have fallen into the sea due to the cliff collapsing on December 6, 2013 in Hemsby, England. Thousands of people were evacuated from their homes as a deadly winter storm and the highest tidal surge in 60 years hit east coast towns overnight, causing flooding and damage in many areas.Stephen Pond/Getty Images

LONDON - The Organisation for Economic Co-operation and Development is sounding the alarm on global property prices and warning that a big correction could be on its way.

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Catherine Mann, the OECD's chief economist warned that several major economies have now seen prices in both the commercial and residential property climb so high that there is a serious chance of them overheating, which in turn could see big price drops.

Mann picked out the likes of Canada - where average property prices have more than doubled since the start of the century - and Sweden, which HSBC said is "skating on thin ice" in 2016, as particular causes for concern.

The OECD warned that in those countries, prices are "very high" and "not consistent with a stable real estate market," according to a report in the Daily Telegraph.

The organisation, which represents the world's developed nations, also singled the UK out, suggesting that a correction in London's famously insane property market may be on the way, but also that it could have benefits for the British economy.

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"We've already started to see some changes in real estate prices in the UK, [particularly in] the London market," Mann said.

"[What's] interesting in terms of the implications for the UK economy is who bears the burden - who bears the adjustment cost. If it's a non-resident then lower house prices could actually be good for the UK," she told The Telegraph.

The OECD is not the first organisation to warn of London's impending slowdown and falling prices have been telegraphed for a long time.

As early as October 2015, Deutsche Bank called the top ofLondon's runaway housing marketin a blisteringly pessimistic note sent to clients. In August this year, a report from estate agent Haart showed that the economic shock of the UK's vote to leave the European Union helped slice just over £30,000 off the average London property price.

According to a Times survey of leading economists released at the end of December, twenty-two from 39 economists surveyed predicted that London house prices would either flatline or drop in 2017.

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At the more extreme end of the predictions, DeAnne Julius, a former member of the Bank of England's monetary policy committee, and Charles Dumas, chairman of Lombard Street Research, said prices could fall by as much as 10% next year.

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