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Government looks to stem dramatic house price increases

Housing minister Grant Shapps wants an era of “house-price stability” and says the Government has levers to help foster a slowdown in price increases.

Shapps told the Observer he wants a new era of stability where prices rise below the rate of earnings to make property more affordable, especially to young people.

He says: “I think it is horrendous that a first-time buyer would need to be 36 on average if they do not have the support of mum and dad.

“The main thing everyone requires for their subsistence is a roof over their head and when that basic human need becomes too expensive for average citizens to afford, something is out of kilter.

“I think the answer is house-price stability. We had this crazy period from 1997 to 2007 when house prices almost tripled, which is fine if you have a house.”

He explained a “rational” market, where prices increased by 2 per cent as earnings increased by 4 per cent, would see a drop over time.

In a separate interview with BBC Radio 4’s The Today Programme on Monday, Shapps said it is “foolish” for a Government to think it can end boom and bust but said it did have certain “levers” to influence the market. 

He says: “I think it would be desirable to have a stable housing market and there are things the Government can do. There are policy levers.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. The First lever required is to reduce the attraction of the BTL market to private landlords and from this comment it looks as though HM Treasury are considering what action they can take. There needs to be a level playing field between First Time Buyers and BTL Landlords and until tax relief on loan interest is removed from BTL landlords this will not occur. The battle however has started and BTL landlords cannot win!

  2. The comments of Mr Shapps illustrate yet again how ‘out of touch’ with the problem of the housing market this and the previous Government really are. There are so many industries reliant on a bouyant housing market. Estate Agents, mortgage brokers,conveyancing solicitors,builders,contractors,consumer goods companies etc etc. To threaten that this Government has levers to control house price rises at a time when the banks aren’t lending and there’s no market confidence is nonsense. How many people does this Governemnt want to put out of work?????

  3. Colin Cloy, please refrain from making comments about matters you do not understand.all societies require landlords, as long as peole need to be housed there has to be landlords.Whether they be Social, private or parastatal. Most private landlords use their properties as a very effective and controllable pension scheme.Maybe Mr Cloy would like us all to take the advice of a bunch of so called “financial advisers” and risk our pension pots on proven bad advice as long as these so called advisesrs get a share of our money whether they gave good, bad or indefferent advice.

  4. Gelboy, While we are making accusations, what about the totally unregulated buy to let market that has bought about one of the greatest banking crisis this country has ever seen. Let’s not fool ourselves this crisis was not only created in America but also over here you only have to look at places like Ireland and Spain to see that the reckless lending around property has a lot to answer for.

    I’m now starting to see so-called buy to let clients who have no spare equity within property and only just have enough rent to cover their mortgages. Many of these people jumped onto the property bandwagon at the last moment thing of the promise of great riches. These people will be lucky to get out of these investments without losing any money, particularly if the market continues to fall with so few buyers around. So please do not go on about property, as if it gives guaranteed returns, because they are not as it the value of the investment can go down as well as up, just like any other type of investment. At least we hold the licenses to give advice unlike most of the property gurus around who take their money and run for the hills with no ramifications.

    The other thing that gets on my tit regarding property investment is that nobody takes into consideration inflation e.g. house prices remained largely static last year meaning that the real value of that investment fell by 3.5%. When you also factor in the cost of borrowing, taxes and a clear message from government control house promises I’m sure that this pension that you talk about is looking like a great investment (not).

  5. “He explained a “rational” market, where prices increased by 2 per cent as earnings increased by 4 per cent, would see a drop over time.”

    The problem with that logic is that most earnings do not rise by 4% for the lowest paid in society or even the middle earners. Therefore house prices going up by 2% a year will still push them further and further away from most first time buyers.

  6. No Government Worldwide has ever managed to stop market forces for very long in an effective way.

    Canute Rex regnat ok?

  7. There’s always sour grapes from those who didn’t get into property before 2004 – when prices started to rocket most advisers woke up to it as an investment as they always do when an asset class has already performed well.

    Even Hargreaves Lansdown, who’s advice on everything other than Property seems to be sound, hate it with a passion since they earn nothing when clients take it upon themselves to invest in something that can POTENTIALLY both generate an income and grow in value over time.

    We live in an overcrowded country – half the social housing has been sold off – the population is ageing, divorcing and increasing – hooray the landlords I say…….

  8. Mr. Fletcher, your comments are simplistic and I believe over-emphasise the desires of the few over the needs of the many. The current government is not ‘out of touch’. It correctly recognises that the no. of people who want to buy a house is much larger than the community of estate agents, conveyancing solicitors etc. I doubt anyone would have much sympathy for the latter, charging £20k for pushing a few pieces of paper around… slowly! Even your logic is suspect – increasing the population’s ability to afford houses must surely benefit housebuilders, yes?

  9. For goodness sake, stop all the hatred of various factions, Estate Agents, Buy to Let Landlords and Solicitors etc. This problem has nothing to do with irresponsible lending in the UK, it has more to do with banks and institutions thinking that all derivitive investments are are surefire winners.
    Also, house prices may be rising in certain ares, but there are many more where they are stagnant or falling.
    The average FTB 95% or B2Let mortgage has never been a major problem for the UK lenders. However, if any UK government thinks it can control the housing market then it is wrong. If things tighten up even more. then this truly major part of the UK economy will commence a downward spiral and there will come a point where it can not be stopped. should this happens there will not be many winners but there will be a huge amount of losers both in their personal wealth and for the country in the loss of all the related industries and their income.

    On a lighter note, Happy New Year!

  10. Is price not dictated by supply and demand? To try and control price from a Govt level will only result in European Law makers saying it is illegal and a form of market manipulation!!

    I am fairly sure most people would like to drive round in a Ferrari however do not see the Govt stepping in to make them more affordable, however I for one would support any such policy!!!!

  11. A house may be somewhere to live but because there are regulators who place restrictions on new build AND people with spare cash like to have more than one which makes a house a commodity there will always be volatility which is simply down to the market forces of supply and demand.

    Not sure if that was what I started to say but what the hell…

  12. First we had the HM treasury sponsored Barker report which blames all the ills of the housing market onthe planning system. Now we have Shapps and Cameron blaming the new ills on the FSA and the regulation of lenders ( who but for the nasty old regulator would all be queuing up to lend N x salary on 100% mortgages having calmly deleted from meomory the toxic effects of that kind of lending) Well folks its about demand and supply – both of them – However, onlt new build is even theoretically capable of responding to changes in demand, at present new supply is held back because of the uncertainty over how Shapps is going to change the planning system. This is leading some of the more anti development Councils to delay decisions in the hope of a planning regime more to their liking

  13. Agree with Ben …. A simple matter of supply-demand economics if wages go up … prices will rise .. legislating to prevent this will merely drive people with surplus income to buy overseas if they are restricted in UK .. another overseas property frenzy (disaster waiting to happen) … quite worrying that a housing minister would even say this … regulate or legislate and people will just look for other tangible investment opportunties outside the DMZ.

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