Property “Bubble” – Why I Disagree With Proposals For A Lending Cap
Buyers all over the country – or more likely their Solicitors – responded to the rumour. They telephoned their opposite numbers in transactions that were about to go ahead and put them on hold. Cue property market coming to a grinding halt.
Nobody would suggest this action was the cause of the financial crash that took place in 2008. But it certainly led to difficulties for the Construction Sector of our economy, which has yet to fully recover. This sector drives the fortunes of thousands of other businesses, large and small, because people want to take pride in their homes.
Getting my hair cut the other day, I spent the time (shorter these days) chatting to the young lady who does the honours. She was absolutely delighted to have moved into her first house, using the “Help to Buy” scheme. House prices round here haven’t grown like in London. She just needed help to get the deposit together. Her sense of satisfaction in making this step onto the housing ladder was obvious.
That’s why I have many reservations about the intervention of the Royal Society of Chartered Surveyors about a house price “cap” today. Outside the M25, the property market does not have any “bubble” to speak of. It is moving, but slowly. Prices are rising in some areas, but not by much. It is far too soon to be thinking of controls.
In addition, the RICS proposal will only create “windows” when lending is available. In the period leading up to the cap, there will be a rush, followed by a slump. Confidence in the market will reduce. Builders will not be able to borrow from Banks, because they can’t guarantee sales.
As long as demand outstrips supply in the property market, prices will continue to rise. Where action needs to be taken in the housing sector is on the supply side. Banks lending to builders. Councils ensuring their planning policies meet the projected needs of their communities. Housing being made available.
This is where sustainable growth in the sector will come. Along the way, many more young people will be able to share the same pride as the lady who cuts my hair.