Labour is proposing two methods of controlling house price rises should it win the next General Election - and the ideas have provoked a furious response from some sectors of the agency industry.
Under the first proposal, outlined by shadow housing minister John Healey, there Bank of England would be give a ‘house price growth guide’ - similar to the one currently in existence for inflation.
As with base rate, this would be kept under review by the Bank, possibly through its Monetary Policy Committee, which could use its control of mortgage lending as a method of reducing house price growth if it exceeded any particular target figure.
Under rules introduced following the banking crisis, the Bank of England already restricts loan-to-income ratios to 4.5 times earnings for 15 per cent of new mortgages to stop banks from lending to economically-vulnerable consumers.
This idea is similar to one proposed by the Institute for Public Policy Research think tank last summer.
There is a second Labour proposal, involving more direct government intervention, with politicians deciding a formal target for house price growth; this could be one of a number of economic and social targets to which all Whitehall departments would work, and which Labour feels could lead to a reduction in house price growth as part of a wider package of economic controls.
Neither proposal is yet Labour policy but both have been floated by John Healey’s office in newspaper articles.
Kate Barker, the respected economist and former member of the Bank of England MPC, and the author of industry reports on housing, tweeted her concern over the proposal.
“A house price target is a difficult one for government. It is totally absurd for the BoE unless given control of a whole other range of policies” she said.
The chief executive of one high profile estate agency contacted EAT to say the idea was “bordering on the insane” given past records of governments “interfering” with market economics to this degree.
The chief executive - who wanted to remain anonymous ”in case there’s a Labour government and we have to work together” - explained that one of the reasons former Labour Prime Minister Gordon Brown gave a level of independence to the Bank of England over interest rates was to stop them being used as a political tool as much as an economic one. “This policy would be reversing that by a back-door method” he claimed.
Former Emoov chief executive Russell Quirk tweeted: “The state interfering in markets? Yeah, that always works out so well. ... Do we really want to see the state setting house prices? Especially given that our statesmen are doing ‘so well’ at running things currently? Nope.”
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An interventionalist state try’s to control everything and in so doing creates chaos and misery
The housing market is just that, a market. So, any intervention regarding restricting house price inflation or otherwise would to me seem to be a utopian concept. The reality is that with over 20 housing ministers in less than 15 years, and the lack of a cohesive housing/property policy, the government already regulates housing prices, often by imposing regulations and laws that are ill thought out and definitely lack input from those in the know. Case in point the Lettings ban, brought in to defend tenants, likely outcome, letting agents will charge landlords higher fees to absorb costs, and landlords will raise rents to cover this cost, who pays more - the tenant, maybe someone in Whitehall should talk to our industry before they do anything. So the thought of a government department being responsible to keep house inflation under wraps is just plain scary, let the market be, otherwise it ceases to be a market.
Have I been transported back to the 1970s? Get rid of Corbyn you Labour members and let's have a sensible social democrat Labour party again.
With all the houses now being built (about a quarter of a century too late) we should start having some sort of equilibium of supply and demand in the next half a dozen years or so; let's just increase the number of smaller terraced homes at the expense of even more 4 bed, detached "executive" homes. All will then be well in the state of Albion.
If Labour get in there won't be a market so nothing to worry about!
Just a Labour sound bite to win a few elector over to them. In reality Healey hasn't got a clue how it would be implemented in practice, nor the consequences of such a policy. Where's the incentive to improve a house? or even maintain it?
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