‘A new UK housing bubble? No, it’s just the old one being pumped up again’
There’s been no shortage of headlines warning the UK faces another runaway rise in house prices, brought on by government incentives to boost home-buying.
Economists polled by Reuters this week were clear there is a real risk of that happening.
But warnings of a “new” housing bubble may be off the mark, says Danny Gabay, director of Fathom Financial Consulting.
“I don’t think that phrase (new housing bubble) is very helpful. If I was a civilian rather than a pointy-head, I would get quite exasperated with the media – they’re either in permanent bust or boom. There’s no middle state.
So we’re not concerned about a new housing bubble, we’re concerned about the fact we never worked off the last one before they began to re-inflate it.
I’m not pathologically opposed to house prices being positive, I don’t run down Oxford Street with a sandwich board saying “My God! House prices could be up 5 percent this year!” That’s not the point.
The point is that they trebled between 1997 and 2007. They then experienced a significant fall until the Bank of England and the Treasury’s connivance stopped the process, and then, like Wile E. Coyote in the Roadrunner cartoons, have remained suspended in thin air held aloft by quantitative easing.
We’re in the process of working off the debt that we’ve accumulated on the back of house prices, and they’ve stopped that. And in fact they’ve stopped that to the extent of encouraging and subsidising – directly using taxpayers’ money – people to take on even more (debt), against exactly the same asset.
We’ve stopped any attempt at any of the repair work that is essential for this economy to be able to heal properly.
The half burst bubble: