Stop the housing market price rises, I want to get off
Your reaction to the news that a think tank has advised that the Bank of England should try to freeze house prices for five years may well depend on where you are on the property ladder or indeed where you are in the UK.
The Institute for Public Policy Research’s recommendations have suggested that such a move could lead to house prices falling by around 10 per cent in real terms as other prices and wages continue to rise, eventually making owning a home more affordable.
Under the proposals, house prices would be allowed to increase “only after expectations of constantly rising house prices have been reset”.
The think tank also said prices would be allowed to grow “no faster than the general consumer price inflation target of 2 per cent, meaning no further growth in the real value of people’s homes”.
The recommendations are part of a wider plan to rebalance the UK economy away from finance to try to avoid another financial crisis.
Reaction to the suggestions on internet forums has been calm, measured, considered, and reasonably argued. Of course, I’m kidding. Like any other subject, the idea has been met with furious argument and insult on both sides, largely, it seems to me, depending on the property you own and where you live in the country.
For those saving for their first home, understandably, freezing prices seems like a good idea.
It must be souldestroying to be scrimping every last penny to afford a deposit while watching prices in your area rise at a faster rate than your savings account, so any hiatus in hikes would at least give first-time buyers a chance of catching up. However a family on a minimum wage or a new graduate on an average starting salary may need prices to be reversed – in some cases by at least a decade – if buying in some property hotspots, the south-east of England for example, or parts of Edinburgh, were to ever be thought feasible.
Those people depending on rises in the value of their property or, indeed their property portfolios to fund their retirements, meanwhile are equally understandably against the idea of any halt in the rise of the market.
For the rest of us, however, house prices have little impact.
Unless you want to move or to remortgage, the fluctuations in the value of the house you own have no immediate effect.
And for those who are looking at selling and buying another property, as long as the movement in the market is across the board, you are either looking at selling cheap and buying cheap or doing both at a higher price.
Many commentators warn against the law of unintended consequences of such price freeze interference, but I think there are some outcomes if the measures were ever adopted that would be to everyone’s advantage.
The last time there were double digit price rises in the housing market many a jubilant seller bored their friends and neighbours with their triumph, usually putting down their sales profits to the upgrades they had installed in their property.
With house prices flatlining, at least those who put their thousands of pounds of uplift down to their own genius in installing a new Ikea kitchen and adding a lick of paint would realise that it was the market that had done the work, not them.