Gordon Browns oft quoted statement of no more boom and bust can now be seen as an unfortunate comment. SInce the bust
common sense tells us to avoid property led booms. But no, it looks like another boom / property bubble is on the way courtesy of Government policy of funding house purchases meshing with low interest rates as promised by the Bank of England for the foreseeable future!
A rise in house prices is oddly enough taken as a sign of confidence in the economy. Higher house prices make people happy it is said though this is a bit of an illusion, you cannot really sell your house to spend can you?.
What is happening?
house prices in London have already escalated beyond the point where they correspond to the wages of the people who live there. Outside London, the impact of the financial crash was discernible, but only for a time. The news this morning is that the buy-to-let market has reached pre-2008 levels, and while that’s driven by London, it isn’t exclusive to it.
And we know that much of the London ‘boom’ is a consequence of affluent foreign investors buying property, partly because they think property prices will go up! We have housing for ‘investment’ and speculation not housing for people to live in. Property prices are not rising because Londoners have rising incomes!
The Government is supporting the housing market:
Every lever in the housing market is now pressed down at full throttle: Funding for Lending is pumping billions into mortgage lending; Help to Buy, part two, begins in January when the government starts underwriting billions more in loans;
The Bank of England has promised to keep interest rates for the foreseeable future.
Ideal conditions then to pump up the housing market, making housing less affordable for most people, when we should be making housing more affordable. The beneficiaries will be those purchasing dwellings to let out, developers looking for an opportunity to build and sell more houses.
In Cornwall we can expect to see all those housing permissions transformed into actual developments but for what purpose? More second homes and more people moving to Cornwall to snap up the new properties! Housing will become less not more affordable contrary to rumours!