There are some headlines you just never expect to see. So this in the Guardian this morning did, I admit, take me by surprise:
What's more, it's not April 1st. As the Guardian notes:
The Bank of England should take action to cap house price rises at 5% a year in order to prevent a dangerous new property bubble, reckless lending and a build-up in consumer debt, the Royal Institution of Chartered Surveyors (Rics) says .
In the latest stark warning about the housing market, Rics — which represents surveyors and estate agents — is calling on the Bank to limit house price inflation to rein in consumers' and lenders' expectations and give a clear sign of when the Bank would use its new powers to calm the market. This week, the organisation warned that house prices are rising at their fastest rate since their 2006 peak.
And as the Guardian notes:
If the inflation limit was breached, Rics argues, the Bank's fledgling financial policy committee, which is in charge of safeguarding financial stability, could act.
If it believes a bubble is emerging, the FPC has the power to direct the banking regulator, the Prudential Regulation Authority, to force lenders to set aside more capital against riskier mortgages, for example, which could make high loan-to-value mortgages more expensive.
I applaud Rics for the courage to say this.
I also note that they have been far too polite to point out that they're asking the Bank of England to, in effect, neuter a key element of George Osborne's economic policy that hinges on creating a pre-election housing bubble. So I'll do that for them.
What an absurd situation.
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The only way to stop real estate bubbles is to tax it. New build is a tiny fraction of the market, so building more homes will not work – you can’t create more land in the places where everyone wants to live. Simple illustration: two identical houses on opposite sides same of street: one in a high rate Council Tax local authority, one in a low rate CT authority this happens); the price will be lower in the high rate authority.
Rics are surveyors not estate agents. These are professional people, not amateur school leavers. As we are possibly, in some parts, approaching the thirds bubble in 25 years. Its good to see they are on top of everything.
Estate agents make their money through commission on property transactions and so have every incentive to encourage greater volume rather than greater value.
I suspect they fear that if prices rise too high, too quickly, that will choke off the number of transactions and thus their income.
So they are, actually, talking their own book (as one would expect).
I see that logic but surely house prices only rise in a market that is selling lots of houses? Maybe that’s too simple minded of me.
In any case, it’s a remarkable headline.
Maybe they rise in a market that is not selling enough houses
That is supply and demand
What!–Something vaguely intelligent happening. I imagine there is a lot of self-interest here from the estate agent world as the last time the housing bubble burst there were lots of estate agents closing down (I wasn’t weeping over that!).
This is the first real acknowledgement (implicit rather than explicit due to cowardice) that house price rises are not good for economies and suck wealth from our communities. Is it the first glimmer of a cultural shift – not holding breath!