Treasury facing calls to let Bank of England freeze house prices for five years

The Bank of England should be given powers to regulate house prices and keep growth at 0% initially for the first five years, a think tank claims.

A report by the Institute for Public Policy Research suggested the dominance of finance and asset prices in the UK economy could be reduced by letting the Bank’s Financial Policy Committee have powers to monitor property price growth in the same way it attempts to keep inflation at 2%.

The IPPR said in a report: “Under such a target the Bank of England should aim to keep nominal house price inflation at say 0% for an initial period – perhaps five years – to reset expectations, and allow affordability to improve.

“It should then be increased to the same rate as the consumer price inflation target of 2% per year, meaning zero real-terms house price growth.

“The target should be implemented using macroprudential tools such as capital requirements, loan-to-value, and debt-to-income ratios.

“Since lending is not the only driver of house price inflation, the Government should accompany this target with active housing policies designed to increase housing supply and restrict overseas purchases of UK residential property.”

Responding to the proposals, Mark Hayward, chief executive of NAEA Propertymark, said: “Excessive house price growth is certainly not something we want to see, but home buyers make purchases on the basis of capital appreciation and the belief that their investment will be protected and enhanced.

“We encourage all measures to help first-time buyers get on to the housing ladder, but with property transactions at an already low level, this sort of tampering could have unintended consequences.”

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7 Comments

  1. ArthurHouse02

    Wrong, Wrong Wrong.

    House price growth or lack of is down to supply and demand. We have a free market economy, so if the demand is there house prices will grow if it isnt then they wont. Simple answers to tackle this problem. Build more blooming houses, and stop lending mortgages to people to cant afford to repay them. Get shot of help to buy and similar schemes, dont even think of bringing back 100% mortgages. The options to control the market are there, but they would get in the way of the big boys making money.

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  2. Will

    Fools. The only effective answer is matching supply and demand.  Capping house prices will just distort the economy.  It is a complex market and most home buyers do not treat home purchases as  pure investment. Further more if you put such controls in place it will bring a stop to new build and increase homelessness.

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  3. Mark Connelly

    House prices held at 0% for 5 years. Do they also propose to hold mortgage interest at 0% for 5 years? Or is it reasonable that during a period where you enjoy no capital appreciation( through market manipulation) your costs of serving the debt increase. Idiots

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  4. marcH

    Remember, the BofE only has a remit to monitor inflation (and has to write a letter to the Chancellor every time it comes in above or below its target rate). It has very little power to affect what inflation does apart from raise or lower interest rates. It gets it wrong almost all the time.

    I don’t see anything fundamentally bonkers with asking the Bank to monitor house prices (even setting a house price inflation target rate) as long as it has no additional powers to interfere in the market.

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  5. CountryLass

    How are they planning to do that? A house is worth what someone is willing to pay. The only way they can realistically force housing prices to stay the same is to demand all surveyors keep prices at a certain level and down-value them all if it is higher than anything sold for in the last couple of years. I’m pretty sure that there is something immoral, if not illegal about that, but I couldn’t say for definite….

     

    Can people not just butt out of the housing market please? Treat it like a skin condition. If you slather on 10 different types of cream, lotion, old-wives-tale concoction etc then you are going to make it worse. Leave it alone for a short while, and if it is still there, go to see a professional who will suggest ONE treatment to help at a time!

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  6. Paulfromromsey87

    How do these idiots qualify to be in a think tank?  Unbelievable.

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  7. Will

    Probably bought a degree from a Rogue college! Most worrying is that we pay the salaries of these idiots.

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