I am not convinced of the inter-related nature of the economy. How could increased productivity in Europe impact upon British house prices?

One of the most exciting parts of the Economics course is discovering the way in which various things that you will study interrelate. If European productivity were to increase, then the unit price of their goods would fall given that they can be made with fewer resources, this would in turn see British consumers or firms turning to European products instead of British products and hence British imports would increase as exports decrease as European consumers and firms opt to switch to the now cheaper domestically-produced goods over British competition. This would lead to a fall in the value of the Pound because British firms are selling Pounds in order to buy Euros in order to buy goods. However, if a weak Pound was deemed unacceptable then the Bank of England might choose to raise the base interest rate in an attempt to attract foreign investment due to the higher returns possible. Were interest rates to increase, then those in the housing market may choose to rent as opposed to buy due to the increased mortgage repayments that would result.