As the political climate continues to resemble an Easter Egg left under a hot sun, the likelihood of a general election lurking on the horizon is increasing. In a bid to win over voters, Labour has recently released plans for the housing market which they claim will reduce the widening gulf between property prices and household incomes.
The Guardian reports claim that Labour are considering two options to ensure house price rises are capped which will enable household incomes to catch up and make properties more affordable.
The first option involves instructing the Bank of England to set a house price inflation target which would set a ceiling point on house price growth. Labour’s intended policy will mirror the Bank of England’s current involvement with the rate of inflation.
The second proposed policy would again see the Bank of England’s financial policy committee reduce the availability of mortgages by taking further control over loan-to-income ratios. Here, the current lending cap of 4.5 times the household income could be monitored and moved to manipulate the ease with which it is to get a mortgage.
Labour used HM Land Registry data taken between April 2009 and 2019 to illustrate the climb in prices from £155,852 to £228,147. Whilst property prices are now 8 times the value of an average household income when this number was only 4 times in 1999, these proposals could be perceived as dangerous and unnecessary state interventions.
Russell Quirk, former Emoov Chief Executive, commented:
“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.
“Look at Venezuela and the oil prices – the country is bankrupt now. The property market should be left to it own devices, the natural flow of the economy, and supply and demand.
“State intervention wouldn’t account for all the idiosyncrasies of the property market. It would be using a hammer to crack a nut. One issue is that Land Registry figures are six months old by the time they come out. So, if the government took action to stop the market overheating, it would be acting on a snapshot of the market six months ago.”
Do you think these policies could help reduce the gap between property prices and annual incomes? Should the government intervene to such an extent in economic matters?
3 Responses
Quite clear your article is bias in terms of encouraging house price growth. Whilst there are merits to this, it’s also clear this had led to a huge affordability issue for those seeking to get onto the property ladder.
It also means higher debt levels within the private sector.
Also, please get someone who knows what they’re talking about to comment next time. This guy is pretty basic.
The obsene profits made on owner occupied property have to be taxed to prevent socal divisions gattng out of contol
I am old enough to remember US destablsation of nations in the 1960s and Venezeula looks to me like a dead ringer for the same. If it is the best argument aganst controlling house prices that can be produced we should definately consider ideas to do so.
LR exists to register titles not provide statistics. If more prompt figures are needed (for this and other reasons) estate agents should be obiged to use software which automatically produces these as open data as part of their forthcoming professionalisation.