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| The UK housing market: a bubble about to burst? |
“People cause problems. No people, no problem.”
by Hoogstraten
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#1001373
of 3278
 05 Dec 2002
10:06 PM |
Zorro – I am trying to pack, but it is immensely boring, so I will take some time out to reply.
I apologise, I realise now I completely misrepresented your views – I share your distaste for sickly liberals. We agree on more than I would have previously believed possible – I could talk about some of the points you have raised for pages.
Although only vaguely related to the property market, I share your apparent disdain for 50% university targets, with increasing numbers of graduates with worthless degrees. I agree that there is a shortfall in London of plumbers, electricians, builders and other trades people (note that the word trade people is neutral as a result of you outing yourself as female).
However, it is financial services that London does well. This feeds London, from the taxi drivers, to the restaurants and bars, to the retailing stores. I don’t think this is going to fundamentally change anytime soon (there is a slow-down at the moment, but it won’t be permanent).
I think that minger Roosevelt said, “No-one can make you feel inferior without your consent.” Deference is for the weak. If you have an opinion, I do not understand why some English people get so discouraged and intimidated by others who bully them with high-handed attitudes. Nor do I understand why the English are necessarily disdainful of opinions given by a person in one profession (or who enjoy a particular social standing), but are sycophantic towards the views of others of different professions or social standings (which is why I prefer to keep my background out of it). For the record, though, since I have just as you would say “dissed” the English I should point out that I am not English.
I noticed when I first joined this forum – there was one clown who immediately introduced himself as a trader at an investment bank. He then went on to argue that there was going to be an imminent 70% fall in London property prices, based on very dubious economics. What surprised me was reaction his views received – people were actually fawning all over him, asking his financial advice on life altering decisions. I have always found this attitude curious.
A situation of haves versus have-nots may cause social alienation, widespread disillusionment and a fractured society. This does not mean it will cause property to collapse. After all, I’m sure that this situation has probably occurred in this country for a thousand years, and is a feature of all capitalist societies.
I could understand why as a Polish person the Austrian Hayek is not your bag, but I’m surprised you are not slightly more sympathetic towards Churchill? Lady Di third, and Newton, Darwin, Shakespeare etc nowhere did not leave me with much optimism regarding the rational decision-making of the huddled masses (though they are entitled to their opinions!)
I agree with you regarding the property discussions being inherently boring as it goes around in circles – this is one of the reasons I try to spice things up occasionally with a bit of personal abuse, or talk about economics more generally.
I would not buy property in Britain now either – I just do not accept that property is going to massively collapse here soon. My view is that there may be quite a few years of price stagnation, so I agree with you that investing in other countries is the way forward.
Spain is my favourite country in the world – Seville seemed like the best city to me (though I liked Barcelona as well). I would like to buy a holiday home there (but I can’t justify it financially). However, Spanish prices have gone through the roof recently, like Britain. I’m not sure this is wise from an investment point of view?
As for Poland, property there sounds like a goldmine for a Polish person with pounds to spend. I once vaguely considered buying in the Czech Rep (Prague), but it is not easy for a foreigner with no local knowledge or local language to do.
Never say never – I may post again from the other side of the world if your European enlargement forum does get off the ground. I will try to take the different side to you again.
Good luck,
Trotsky (Workers of the world unite!)
ps. Whats up with JoJo? Surely he needs to grope his chick, or play a round of golf, or watch a comedy to chill out a little?
pps. Andy B. - I leave you in charge of posting the occasional optimistic comment - you commentary was always interesting.
“The pessimist may be right in the long run, but the optimist has a better time during the trip.”
Don't let the doom mongers drag you down... |
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FT Monitor
by Mr Britain
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#1001372
of 3278
05 Dec 2002
09:40 PM |
I suspect you are pushed for time so I can understand why you did’t notice it, but amongst the waffle from Jack Straw on #1001350 twenty page essay he refers to you as an “imbecile” Is this true democracy at work or like me do you just ignore him.
You may all be interested on the comments i found at
Http://WWW.Halifax.com/Comments/property.htm
but i think you will find that it says it all and is well worth a read |
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Monitor
by JoJo
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#1001371
of 3278
05 Dec 2002
09:38 PM |
I have twice now posted a personal attack on failing 2nd year economics students pretending to be intelligent, and you have deleted my posts.
Let's continue this in the behaviour forum. |
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Zorror
by Mr Britain
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#1001370
of 3278
05 Dec 2002
09:37 PM |
Loved the last article and it’s a shame I don’t have your email address and I’m not about to give you mine on this site, but it would be great to have a chat with you one day. I don’t think I’ll be here much longer.
Keep it up. |
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Centralised control of the media
by
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#1001369
of 3278
05 Dec 2002
09:04 PM |
| Ok monitor, I get your point. But you get mine, eh? |
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Farewell to Hoogstraten
by zorro
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#1001368
of 3278
05 Dec 2002
07:56 PM |
Just to clarify; you misunderstood me when you assumed that what I was recommending was dishing out unmerited 'RESPEC'' and 'an incentive system based on handouts.'
The very opposite is the case(not for nothing my best friends call me Stalinist). What I mean is this: it is a false neo-liberal god (liberal being the dirtiest word in my vocabulary)to hanker after creating masses of low-brow pseudo-intellectuals who create no value added. What we need is:
1. to provide more proper vocational and technically orientated education (by 'proper' I mean using state-of-the-art equipment and not spending time on ticking stupid boxes on some mickey-mouse GNVQ courses)
2. to provide social 'RESPEC'' for people thus qualified; in the one and only way that matters to them. So no, I don't mean sugary 'aren't you clever Johnny'; I mean there is absolutely no reason why Johnny should be earning less than you or me. And the market is bearing this out - my builder is actually earning more a day than I am. Fair enough. I do respect a sparkie, Mr Britain.
The British, while being militantly anti-intellectual, simultaneously dis manual skills. This is stupid.
What does the price of fish have to do with the housing market? Just that with the increasing numbers of disaffected, bored and under-employed young people not ever being able to buy a house, since we are not providing any social housing for them, we would do better to enable them to gain the means of buying property themselves, while giving them a self-respect that will not turn the have-nots against the haves.
I shall allow myself a slither of optimism: could the fact that Brunel came a close second to Churchill in the recent (daft and anti-intellectual as it was) quest for the most impressive Briton be symptomatic of the fact that social contempt for those than can do rather than just talk is waning?
On this note, I have to admit that, enjoyable and entertaining as it has been following and contributing to this forum, most of what could be productively said on the topic of the housing market bubble has been said. If we carry on like this, we will end up endlessly rephrasing our positions.
So, for the record: I think that BOE will find it pretty hard not to lower the interest rates eventually and this might help to spin out the agony a bit longer. But in the end, we just do not produce enough to support the meaningless paper values of property, constantly pushed up by the banks that the government is failing to control. The only thing that will eventually stop the banks from defaulting will be inflation. If it does not come about naturally, it will have to be made. So I for one am revising my investment strategy and diversifying, partly into Spain, partly into Poland.
Do you know something? A very large proportion of privately owned property in Poland is owned outright (forget the percentage. It is a market with very sound fundamentals. I read today that some Western banks (was it HSBC?) are pulling our of Japan as the market there is over-leveraged and are thinking of going 'into Europe'. Where to, I wonder? Into the almost over-leveraged England? Methinks not.
So enjoy the antipodes, Hoogstraten. Me, I am heading south (Spain) and east.
I shall restrain myself from posting again, although it will be tough, unless the monitor comes up with a forum on discussing the merits of EU eastwards expansion.
Rob G: I enjoyed the Warner Brothers image of the beast paddling through the air - very apt.
Adieu
PS, although it does not really matter, I am in fact Polish. I am also not a 'he'.
She exists, pursued by a bull. |
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Jack Straw - so little time, so much to refute
by zorro
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#1001367
of 3278
05 Dec 2002
07:09 PM |
You say
I see that there are new policies being considered by UK banks to change their lending style. These concepts include longer terms and higher lending ratios than 3.5 to 1. Clearly housing is actually more affordable in real terms than before.
I fail to see how one could possibly draw this conclusion from the above statement (if it is factually correct, which I assume it is)when so patently precisely the opposite is true: we are stretching affordability to the limit. Interestingly, it is in Japan, with its 10+ years of deflation that the mortgages exceeding human life span have been pioneered. What this really means is that greedy banks had overextended in their enthusiasm to lend funds and they are desperate to keep the ball in the air. It reminds me of the situation in India, where the poorest sometimes have to 'sell' their children for a lifetime of unpaid labour to a contractor in order to repay some spurious past debt. So, in the brave new 21 century we in the developed world will also boldly step into new forms of slavery - to financial institutions.
You accept the government figure of 50% of the population going to university (well, I suppose with your handle, you would). I don't think that 50% either are or will be going to university, nor is it in the slightest desirable socially. It is merely another example of New Labour newspeak where exactly the opposite is true, as in 'shortening admission queues in the NHS' actually means 'expect to die on a hospital trolley'. Similarly, Tony Blair is trying to divert attention from the fact that by trying to raise university fees he will actually dramatically curtail the numbers of those going university.
But from this figure, as well as from the fact that the social housing stock has been greatly depleted over the decade you draw the conclusion that expectations of the well-educated populaton will be enhanced, and that improved quality of housing will be expected, and related increases in quality and prices will follow.
I draw the opposite conclusion. There is a crisis in the making: that we have ever-increasing numbers of ignorant, poorly-educated people lacking any saleable skills but with their perceptions of own value and ensuing expectations quite high, I agree with you here. But just because we may all want a villa in St Tropez it does not follow that we shall get.
Not all the imigrants, regrettably, are brain surgeons (we missed the boat not letting in the Hong Kong Chinese and allowing Canada to cream them off, that was a daft move). So - with corporation taxes diminishing, businesses leaving and increased demands on social housing posed by the ever-increasing uneducated idle poor (as unfortunately it is impossible to keep calling them 'the working class') the only increased demand in housing will be for acres and acres of favelas.
And eventually, come the revolution, the mansions of Hampstead and Chelsea will be sequestered for the most deserving comrades, ten to a room. You and I will be in a Gulag for not taking our Rolexes off fast enough and being a bit lippy (only kidding, I don't have a Rolex, I have a Casio). |
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Hoogstraten departure - The meek shall inherit the Forums
by Andy B
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#1001366
of 3278
05 Dec 2002
05:40 PM |
With the announced departure of the Great Hoogstraten it appears even though the meek will never inherit the earth or London,
they will inheirt this forum.
Good luck Hoogs,
Regards,
Andy B. |
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Hoogy
by Big Ollie
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#1001365
of 3278
05 Dec 2002
05:19 PM |
Aaaawwwww....thanks Hoogy, you've made Big Old Ollie very happy this afternoon.
I would, however, like to point out that I still feel that my analysis of the housing market is more relevant than some of the others posted before me. |
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Two cents worth? No chance - not even with 1000% inflation...
by Hoogstraten
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#1001364
of 3278
05 Dec 2002
04:25 PM |
Big Ollie, you say:
“I stongly believe that the current state of the housing market has been brought about by the inability of 'folks' to distinguish between the words there and their.
There you have Big Ollie's 2 cents.”
I would question the valuation methodology you have used in order to ascertain that your gem of a comment is worth two cents. It simply was not that good. |
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House Prices
by Big Olly
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#1001359
of 3278
05 Dec 2002
03:53 PM |
I stongly believe that the current state of the housing market has been brought about by the inability of 'folks' to distinguish between the words there and their.
There you have Big Ollie's 2 cents. |
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Reply to Zorro
by Hoogstraten
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#1001351
of 3278
05 Dec 2002
02:44 PM |
You say:
“What we don't have in common is that I don't see the poor just as a minor irritation on my doorstep.”
I don’t actually have anything against poor people per se – I am much more irritated by stupid, ignorant people. However, there is a reasonable correlation between the two – usually smart people have worked out some way to make a better life for themselves (either via the education system or by entrepreneurial skills). You could say that people are usually just born stupid, so it is not their fault – this fact does not however improve my level of patience.
“It is … possible for altruism to be self-interested, as you profess to be, and so am I.”
Agreed. You then say:
“Now, if the shooters and the shootees had some other socially respectable ways of making a good income (neo-marxism with a human face, arright?!), and - money not being everyting, in spite of the preoccupations of this forum - if they had some other ways of gaining 'RESPEC'' maybe, just maybe, things might work out better. Now, that is called social engineering. It coud also be called socialism. “
I disagree with you completely. Sometimes you have to be cruel to be kind. If you set up an incentive system based on handouts, you simply get a proliferation of beggars holding out there hands. The best favours you do for these people are to reward their positive contributions (the market does this), and punish their indiscretions (the legal system will hopefully do this). With respect, your views are not neo-Marxist, but sickly liberal. These ideas (though superficially caring) are in fact a recipe for societal mediocrity and failure.
You then say:
“However, if the game is shifting East: although this is bad for the UK - since you don't seem to be either as patriotic (or pessimistic) as Mr Britain, why not shift your capital east?”
No, I believe Britain will stay strong. It is financial services, telecoms and IT that are the future for first world countries – Eastern Europe can have the manufacturing sweatshops. Financial services are currently struggling, but it will come again - mark my words (0 out of 10?)
Finally, Zorro, I have never turned down the option of a free drink in my life – it seems morally wrong, but I’m afraid I will have to decline. I am leaving London very soon (for a number of years), to live on the other side of the world! Mr Britain has convinced me regarding the advantages of expat life (not really - I actually booked to leave some time ago). In fact, this will be one of my last posts on this site – I know JoJo, who hangs onto every word of every contribution I make, will sorely miss me… |
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"A little nonsense now and then, is relished by the wisest men." - Willy Wonka
by Jack Straw
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#1001350
of 3278
05 Dec 2002
02:03 PM |
Due to farcical responses to previous postings I am limiting myself to one quality posting a day. It seems to me that certain people are providing a kind of social commentary, proving Darwin’s “survival of the fittest” theory, the entrepreneur, or risk taker, succeeds where the sheep fail. As Livermore laments in “Stock Operator”,
“When my shoe shine boy was recommending stocks….. it was time to pull out”
Mr Britain has no idea and simply reacts, as a plant would do when leaning towards the sun, in a sad predictable manner, with the same diatribe. I can confirm he has no idea about the costs associated to AIDS and there is certainly no economic theory correlating this virus to housing. This will be my last posting on this issue, unless valid economic theory can be proved and sourced, I do not take the ranting of an ex tradesman as a quality reference.
“That my contribution is as good as yours”
I would hazard a guess your contribution is greater in terms of quantity, but never quality darling.
Secondly, to the FT monitor, if you cannot tell there is a difference in the commentary of Hoogie and myself you are clearly an imbecile. Quotes from others, about IP address functionality, have identified why this is the case. It makes me think of Blackadders comment, “ The times really has gone down hill”.
Thirdly, for Jojo/ Helen our “schizo”, with multiple id’s on this forum, who stated,
“Post something about housing, or leave.
Without multiple personas, and without showing off”
I presume this also refers to me. I find it unbelievable that this “person” missed my previous messages over the past couple of days. But I’m sure this will “put to bed” this query, just as Jojo’s mother did to him yesterday.
Zorro, your theory about manufacturing jobs going east is very true. But, I don’t believe this has any bearing on the British economy. The economy is changing, as it did during the industrial revolution, just look at Mr Britain he was some form of monkey sparkie and now he works in IT. The truth is that first world industries are moving from the manufacturing, such as the production of cotton, to provision of professional services, such as telecoms. Our services, in the UK, are more below the line than above; therefore although the balance of trade will get worse our balance of payments for the country will improve, as we transfer the emphasis of the economy. If we correlate the large companies 50 years ago to now – British cork has fallen away, but has been replaced by companies such as Vodafone, the largest telecoms provider in the world with a global market share of 25%. People who hold onto industrial revolution industries, i.e. manufacturing, are purely the luddites of the new generation. There is no creditable argument for us to produce our own manufacturing goods when we are not competitive globally. This is the key factor missed by the coal miners of the 80’s – how can we compete against Ukrainian miners who get paid once every 6 months.
Now what does have to do with the UK housing market?
This is simple, with a changing economy, with 50% of people going to university and housing owning at a high level, the whole social strata of the country is changing, we can see social housing provision has reduced by 500k homes in the last 10 years.
In 1991, the total number of social housing stock was 5.8 million dwellings with 88% being managed by borough or district councils, funded by the government. In 2001, total stock levels have declined by over 9% to just under 5.3 million homes, local authorities are now responsible for less than 70% of all social housing stock, having reduced their number of dwellings in management by over 28% in the last 10 years
HOUSING ASSOCIATION MARKET REPORT 2002 – AMA RESEARCH
Therefore disposable income and social expectations can only increase, just look at new labour they have recognised this and changed. Thus house ownership will only increase as a percentage, and also in quality. The Times yesterday had an article about the demand for “Riverside Apartments” of high cost and quality in the north of England. The article is entitled, “How to get your foot on the ladder in the north”, where there are examples from Hull and Manchester where properties were selling for 4 to 4.5 times the average value of the areas. If we extrapolated these theories and combined with a “psuedo hayek theory” we can look at the “natural level of house prices”. This natural level I declare is actually naturally higher than the eighties due to the success of new industries, “stars” using the Boston consulting group matrix, who replace our dog industries, manufacturing of finite products, and the changing social system of the UK. We need only to look at the movements into London of many European companies; Deutsche Bank is effectively managed from the UK. I work in Frankfurt frequently; their airport has 250 check in desks, of which there are generally 15 open, but in London air service provision continually fails to meet demand.
I am aware this flies in the face of zorro and Mr Britain’s image of a west in decline. But in real terms the west, in comparison to OECD averages, surge higher and higher. If we look at the link below, on levels of disposable income (Page 13)we can see that globally the UK is a strong performer. Its relative diposable income increases, in real terms, since 1977 out performs all the developed world.
www.kc.frb.org/PUBLICAT/SYMPOS/1998/S98atkinson.pdf
Why you may ask, well this is down to my previous points, leaving manufacturing industries, which the US supports for its internal market - given its sluggish but improving performance, has strengthened the UK competitively and we can also see the relative decline of Germany and France, who have high manufacturing bases.
This additional income, tied into a non-political interest rate policy, is leading to a stronger economic market. Housing is benefiting from this; traditional policies on housing are as outdated as the concept of UK manufacturing.
“Diversity of national experience
The United States, the United Kingdom, and a number of other
OECD countries, have experienced rising income dispersion since
The 1970s. Above, based on national studies of the distribution of
Equivalent disposable household income shows that this has been
Especially marked in the United Kingdom, where the Gini coefficient
(A summary measure of income differences) rose by nearly
Half—a very large increase by historical standards. The rise in the
United Kingdom seems to have been particularly sharp.””
The Distribution of Income in Industrialized Countries – A B Atkinson
I see that there are new policies being considered by UK banks to change their lending style. These concepts include longer terms and higher lending ratios than 3.5 to 1. Clearly housing is actually more affordable in real terms than before. My Grandfather had bring the bank manager home to dinner, in the 50’s, to get a mortgage - this will not happen now.
But where does this leave us now? Well I would suggest not in a bust position, to use sho_ryuken , or what ever their id is. The Nationwide identified growth again last month,
Headlines November 2002
Monthly Index (seasonally adjusted) Q1 1993=100 232.3
Monthly change (seasonally adjusted) 2.0%
Annual change 25.5%
Average price in November £115,761
Source – FT link to Nationwide
And further identified, what they termed “double digit growth” in the FT on Monday,
“The Nationwide will unveil its forecasts for next year in two weeks' time and is expected to predict increases of about 10 per cent. The Halifax said it expected double digit house price inflation in 2003”
Article by FT staff 3rd Dec - House prices jump by 25%
So where does this leave us? Well it leaves us with a more affluent population, with average asset bases that the whole world envies. On the premise that the average house is worth 115k and the annual rise this year is 25%, each households net worth has increased by 23k this year alone. The govt has predicted the requirement for 1 million new homes in the next 10 years. And using the quote below from Govt policy documents, we can see brown field site, or urban redevelopment is their main objective. This clearly will lead to added value in the urban property market, through its associated improved quality of life (via city planning) and transport links.
“Re-use of previously-developed land and buildings
5.7 The Government has set a national target that at least 60% of the additional dwellings should be achieved through building on previously-developed land or by converting existing buildings. This national target should be underpinned by appropriate regional targets set in RPG. The Urban Task Force led by Richard Rogers is examining how to build more homes on brownfield sites and ways of making urban living more attractive.”
Planning Policy Guidance Note 11:Regional Planning Public consultation draft
Now on the basic premise that you can’t dispute these figures and statements, since they are based on fact. Now arguing that these are vested interests, as you probably will, is naïve and proves you have no real understanding of the market. The main reason the UK has 4 of the largest 10 banks can be seen as being down the mortgage market. Now have previous crashes sent any bank to the wall – NO! But has it given us 4 world leaders – YES! Risks in housing are negligible compared to the Latin American, or AIDS ridden country, investments recommended by Mr Britain.
Now, although I wish to carry on I must bring this to a close, as this release is an absolute monster. My continual policy is over affordability, e.g. nationwide figures below: -
“For example, someone borrowing £100,000 today at the average interest rate prevailing during the mid-eighties, of just under 12%, would have to make repayments of £995 per month, which, as shown in the chart below, would initially be equivalent to 50% of average gross income. In contrast, today mortgage rates are at around 5.5% and the monthly repayment on the same £100,000 loan would be £606 per month, or initially 30% of average gross income”
http://www.nationwide.co.uk/hpi/hpindex/monthlymenu.htm
Housing is more affordable than it has ever been, and the ECB’s 50 bp cut today leads me to believe that clearly the BoE is only holding to stop the housing market booming further. What relevance does this have you may ask? Well when we eventually enter Europe, lets face it, our interest rates will fall. If this occurred now our interest rate would move from 4% to 2.75%.
Using the Nationwide figures above mortgage interest payment costs only with UK as part of the EU:-
80’s 100k 12% 1,000
Today 100k 5.5% 458
EU 100k 4.25% 354 (23% less than present)
Now lets face it this will not lead to a bust, 23% reduction in interest costs, but more likely a boom and a whole restructuring of the housing financing market, the 3.5 times/25 year luddites will be washed away.
In summary, I’m bullish as ever. I am yet to see a reasoned argument over housing price falls. After all as per my pervious comments a 70% fall predicted by Martini would lead to yields of 20% in London and 50% in the rest of the country.
"Democracy; the theory that the common people know what's good for them, and deserve to get it good and hard."
H L Mencken
Now lets face it with interest rates at 1.75% in the US, 2.75 in Europe and 4% in the UK whose not going to flood into the UK market to take advantage of these “super normal Profit”. Its pure economic common sense. Oh and zorro, I believe we can all agree that we can all use quotes in our own manner. Your summation that I “use them incorrectly” leads me to think back to Arsne Wengers quote of last year,
“ Everyone thinks they have the prettiest wife” (or the prettiest literary skills)
what a genius! Oh my recommendation, based on affordability, is informed investment in property, via an analysis of the potential in popular and up and coming areas. |
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What are we here for?
by Stuthepooh
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#1001349
of 3278
05 Dec 2002
01:14 PM |
Hoogie
Thanks for setting me straight on the natural rate of interest. I think you’re right.
Frankly, I don’t see much wrong with the recent postings on this sight. It’s great entertainment and most of us can learn a lot. I haven’t had such a good laugh in my lunchtime for a long time…
Stuthepooh |
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Lenders Fuelling Rising Prices
by man
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#1001348
of 3278
05 Dec 2002
11:16 AM |
We get you FT Administrator. So here is my contribution.
Much of the debate about the housing market seems to be focused on the short term financial health of the consumer and the notion of housing supply and demand. Valid as these considerations can be, a mortgage typically forms a long-term contract and what is not often accorded sufficient consideration, if at all, is the extent of the market’s control and influence by the lending institutions. The recent housing market boom and state of the consumer credit market more generally, says as much about the willingness of borrowers to borrow as it does about lenders willingness to lend.
As a difficult stock market has encouraged investors to save more in deposit accounts, many lenders have been cutting many deposit rates even in the absence of the Bank of England lowering its official rates. But wider margins encourage lenders to lend and the notion that high house prices to earnings will hold back the housing market has clearly been proved wrong. How far house prices can continue to rise should be about economic fundamentals, but the lending institutions have the collective capacity to shift the market away from its long-term level of equilibrium at a time when monetary policy is also attempting to contend with other contrasting economic issues. With mortgages affordable in the face of low interest rates, it has been lax lending policies with the cycle of consumers’ wealth induced willingness to borrow increasing amounts that has formed the mainstay to higher house prices and consumer spending more generally. Of course, if history remains a guide, this cycle will be seen to be unsustainable and with housing activity as a percentage of stock significantly lower than in the 1970s and 1980s, there is a more precarious underlying robustness to the housing market than even historic parallels would suggest.
Like the last housing cycle, it was the ending of a lax lending environment that exacerbated the bust once the excessive boom in house prices came to an end and the longer lasting or extreme such excesses are the deeper and potentially longer lasting any eventual correction is likely to be. The recent warning on house prices by the Deputy Governor of the Bank of England was appropriate, but there are of course wider economic reasons why the Bank of England has not raised official interest rates and this highlights the policy dilemma facing the authorities as monetary policy alone is at best helpful and at worst damaging when attempting to deal with the current economic imbalances facing the economy. An alternative policy is to effectively counsel lenders that lax lending policies are accentuating the housing market boom that might even end with fewer members for the Council of Mortgage Lenders to covet in the future.
man |
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