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Shares have easily outperformed property since the credit crunch stunned markets in 2007, the latest performance figures show, even despite the recent impact of the eurozone debt crisis on stock markets. Thanks to fears about a possible debt default by Greece – and suspicions of contagion spreading to Ireland, Portugal, Spain and even Italy – shares have so far had a poor 2011. Furthermore, they have easily beaten property since the lows of 2009. Britain’s booming wealth From 2003 to 2007, Britain’s wealth boomed like never before.
Thanks to years of rising incomes and ‘easy credit’, house prices and share prices rose steeply. Over the same period, share prices also set off on an upward trajectory, after bouncing back from the lows of March 2003. This steep increase in share prices made almost everyone better off, thanks to the shares held inside pension pots, insurance policies, and other investment funds. The big crunch After five years of relentless rises came the bust.
With huge losses mounting up from shaky US ‘subprime’ mortgages, banks became afraid to lend to each other. After the inter-bank lending market froze in August 2007, a string of British banks needed bailing out, starting with Northern Rock in September 2007. An injection of tens of billions of pounds of taxpayers’ money pulled the UK banking system back from the brink. However, great damage had already been done to the UK economy, as we went through the longest and deepest recession since the 1930s. This led to a steep fall in share prices and property values, plus widespread job losses and pay freezes. Battered by a hurricane With capitalism convulsing, Britain’s wealth took a beating. After the credit bubble burst, property prices plunged.