"*The Bank of England now has the ability to take the froth out of future housing market booms*, without having to resort to interest rate increases," is the way the UK's realtor association explains their *demand that the BoE limit national house price growth to 5% a year.* While they would benefit from short-term gains, it seems the Royal Institution of Chartered Surveyors (RICS) sees the dangers of another unsustainable housing boom outweigh them. As The FT reports, RICS adds, "this cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt." Or will it merely lead to further financial engineering and leverage?
Via The FT,
*Estate agents and surveyors have become so concerned about the dangers of another unsustainable housing boom that their trade body is urging the Bank of England to limit national house price growth to 5 per cent a year. *
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“The *Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases,*” said Joshua Miller, senior economist at RICS.
“This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. *We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”*
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RICS said the FPC, which is charged with overseeing the stability of the financial system, should make a clear statement about limiting price rises to 5 per cent and back this up with more powerful tools if necessary.
However, some have warned a strict 5 per cent limit would not be practical, citing the wide regional variations in house market performance. *“If house prices on the national level are driven above 5 per cent due to a very strong London market, but prices are falling in the North, it is not clear an immediate cap on loan-to-value ratios would be appropriate,”* said Matthew Pointon, property economist at Capital Economics.
Reported by Zero Hedge 1 minute ago.