Brokers have attacked a proposal by the Royal Institution of Chartered Surveyors to cap house price growth at five per cent a year.
Last week Rics called on the Bank of England’s Financial Policy Committee to limit house price growth to slow the build up household debt and prevent a housing bubble. It says at the very least house prices should rise in line with nominal incomes, which have grown by around 3 per cent a year since the 1990s.
But brokers say the plan is without merit. John Charcol senior technical director Ray Boulger says: “Any fool can come up with a recommendation, the catch is how exactly to implement these plans and that aspect seems to have been cleverly avoided.
“It is totally impractical. Targeting something as major as this makes no sense from a macroeconomics viewpoint and in my opinion, you could not do it even if you wanted to.”
Mortgage Centre IFA director Fahim Antonaides believes the suggestion from Rics is not only impractical but actually goes against basic economic principles.
Antonaides says: “What Rics is talking about is putting an artificial cap on an open market. It seems to be akin to having a pegged currency and from that perspective I am not sure this would work.”
Antonaides believes there are other, better ways to slow house price inflation.
He says: “Why not free up more land banks, or properly accelerate housebuilding in areas where planning does not currently allow it. We should avoid artificial caps and look at these or other ‘natural’ alternatives before taking such action.”