Mark Carney, the Bank of England governor, has said that the property market could end up ruining the economic recovery if prices continue to rise as they are now.
This has been covered by the media in bucket loads this weekend (May 14); some of this coverage has been bizarre in my view. The reality is , from my perspective, that Mark Carney just told the truth, from his perspective:-
We aren’t building enough homes to cover things like population increase, increased divorce rates and people living longer
He can only control the property market which is affected by mortgages – the number of which are currently declining
His job is to make sure lenders only lend to people who can afford a property now and if there is another crash
Personally I can’t see what’s wrong with this, it’s not political, it’s not ‘covering himself’ it’s reality.
The truth is as we are third generation house owning public. That means a lot of property and money is being passed down from one generation to another. So people have more money to fund buying more than one home, a bigger home and/or have money to pass on to first time buyers to buy their first home.
And with more people in the future likely to be trading down rather than trading up, the number of cash buyers is likely to grow. And the only thing Mark Carney can do is restrict what those buying with a mortgage can offer to restrict what these cash buyers can secure on their property and to be honest that isn’t much of a ‘stick’ to use on the property market.
The only way to limit price rises is to build
In Nottingham we don’t have these huge price rises everyone else talks about. Many properties are selling out at the same or even half the price they were bought for. Some properties are growing in value – but mostly highly desirable properties in great locations where home owners have a high degree of equity in their homes already.
Why are prices for two bed homes at £60k and one bed flats at £50k or less? Two main reasons, firstly because our wages are pretty low ‘on average’, so borrowing is restricted and secondly because we have the space to build and we don’t have huge objections every time a development is put forward.
So, Nottingham is living proof you can prices can be kept ‘reasonable’ if you match supply and demand and build what people need and can afford to buy.
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