MacroScope

The big questions on the UK housing market: what the analysts say

Although UK house prices will head steadily higher in the next two years, analysts polled by Reuters are divided over whether the Bank of England can restrain the market if it overheats. Here’s what they said in the latest Reuters poll, taken this week: How confident are you in the BoE’s ability to moderate the housing market if necessary?

PETER DIXON, COMMERZBANK: “Not very. A cynical interpretation would be that the government wants to see a decent rise in house prices over the next couple of years and would not be best pleased to see the BoE take the steam out of it. Nor is it clear that the BoE has the policy instruments to target the housing market without causing collateral damage elsewhere in the economy. Finally, it would call into question the thrust of policy if Help to Buy is giving to the housing market with one hand whilst the BoE is taking away with another.”

PHILIP LACHOWYCZ, FATHOM FINANCIAL CONSULTING: “Not at all. The Bank of England through the FPC does now have the instruments and mandate to take specific action in the housing market. However, we find it unlikely that it will take any action as it would mean directly working against government policy.”

AZAD ZANGANA, SCHRODERS: “The Bank of England is not in the business of moderating house prices, only stopping financial instability as a result of bubbles. There is no evidence to suggest that a speculative bubble is building, for example, mortgage equity withdrawals. A fundamental lack of supply in housing is driving up prices, and the only sustainable solution to this crisis is to build more homes. “

RAY BOULGER, JOHN CHARCOL: “Not very, not least because many parts of the UK are a long way from needing prices moderated and it would be difficult for the Bank to introduce a regional policy. However, the ending of FLS in Jan 2015 will have a moderating effect if it is not renewed or replaced with something else.” 

How to play down a housing boom like it’s 1999

Here’s some of the top reasons from a 1999 Reuters poll on why a housing bubble wouldn’t form, which are re-appearing 14 years later.

The Bank of England will stop a bubble forming

    2013: “If there’s another bubble, the Bank of England and the Government of course have means by which we can anticipate that and ensure that that doesn’t happen again.” – Danny Alexander, chief secretary to the UK Treasury.
    1999 Reuters poll: ”Economists and property specialists say the Bank of England won’t let another inflationary boom happen. The Bank has already said it will monitor house prices closely. ‘It’s unlikely to become inflationary unless the monetary policy stance becomes too loose and that’s highly unlikely,’ said economist Trevor Williams of Lloyds Bank TSB.”

 

House prices expressed in real terms are below their peak and affordability is better

Britain’s Help to Buy – what the forecasters say

Now Britain’s housing market is showing real signs of life, should the government abandon its “Help to Buy” scheme to boost access to the market for homebuyers?

Economists and property analysts polled by Reuters over the last week were split. Two weeks ago, a majority of economists put the chances of another UK housing bubble forming at 50 percent or greater, catalysed by the Help to Buy programme.

Here’s a few comments on either side of the debate. Cancel Help to Buy:

“The housing market was slowly recovering already, it has been good for the sector, but in the long term it is throwing money at something that is not the solution. There is a danger we are creating the next bubble and not learning from what’s happened previously.” Mark Hughes, co-head of research, Panmure Gordon