BOE's David Miles: House Prices will "Rise for Years"

HAMISH_MCTAVISH

Britain's growing population will underpin rising house prices for years to come but fewer people will be able to benefit than in the past unless new financial products are created to help first time buyers, a Bank of England policymaker has warned.

David Miles, one of the Bank’s nine rate-setters, said in an official paper that the desire for space caused by the UK’s rising population would reinforce planning restrictions and make it more difficult for housebuilders to keep up with demand. As a result, he said: “We should anticipate a rising trajectory for real house prices over the longer term.

“This is particularly likely in a country like the UK where population density looks set to rise relatively fast. The model also suggests that the upwards trajectory in house values may ultimately become steeper than the rise in real incomes.”

However, a housing boom would be out of reach for first time buyers, he added, because credit will remain in short supply. Before the financial crisis, buyers did not need a deposit to secure a mortgage. Since the recession, though, large deposits have become essential.

To bridge the credit shortfall caused by risk-averse lenders, Mr Miles proposed a new “equity loan” product – which would act as the buyer’s deposit.

Under his plan, providers would take equity in the property in return for a larger share of the upside rather than any monthly or annual payments. He used the example of a 20pc equity loan, which would take 36pc of the increase in the value of the property.

“In exchange for taking a higher share of a capital gain on a property a provider of an equity loan might agree to receive no payments until the property is sold,” he said.

“One way in which financial institutions could provide such loans without taking on significant house price risk is to issue savings products with returns linked to house price changes, a saving product which potential home owners are likely to find particularly useful.”

http://www.telegraph.co.uk/finance/economics/9153363/House-prices-to-rise-for-years-says-BoEs-David-Miles.html

This is the same David Miles who predicted in early 2008 that up to 20% falls in house prices were likely. The man has a good track record of being right on this subject.

Good to see a realistic appraisal of the situation being reported these days too, first the excellent speech by the BOE's Broadbent being reported on the BBC, and now Miles in the Telegraph.

Jimmy_31

HAMISH_MCTAVISH wrote: »

http://www.telegraph.co.uk/finance/economics/9153363/House-prices-to-rise-for-years-says-BoEs-David-Miles.html

This is the same David Miles who predicted in early 2008 that up to 20% falls in house prices were likely. The man has a good track record of being right on this subject.

Good to see a realistic appraisal of the situation being reported these days too, first the excellent speech by the BOE's Broadbent being reported on the BBC, and now Miles in the Telegraph.

Is this the fella who has been part of the insider trading scam ?

His pension seems to have performed pretty well.

CRASH_BANG_WALLOP

House prices ‘unlikely to recover’, warns Bank economist


http://www.lovemoney.com/news/property-and-mortgages/house-prices/13499/house-prices-unlikely-to-recover-warns-bank-economist

wish the dude would make his mind up

DervProf

CRASH_BANG_WALLOP wrote: »

House prices ‘unlikely to recover’, warns Bank economist


http://www.lovemoney.com/news/property-and-mortgages/house-prices/13499/house-prices-unlikely-to-recover-warns-bank-economist

wish the dude would make his mind up

I wish the BoE employed people who seemed to have a clue.

chewmylegoff

I thought houses were affordable already?

Graham_Devon

Is this Miles bloke still on the BOE board taking part in setting interest rates?

Surely this signals they DO take house prices into consideration, with vested interests such as this. I mean, seriously, banks taking a stake of the future HPI? Coming from a BOE member? Surely this is simply outright dangerous if a BOE member is recomending banks lend on future predictions....considering what we have just been through and the money we have had to put into the system due to property speculation!?

Would the BOE really recomend such stupidity?

If we are up against this sort of stuff from Britains best, then I'm lost for words.

I mean, it would obviously increase HPI if people didn't have to actually pay monthly payments, but jesus wept, think of the massive problems this would create!!!

HAMISH_MCTAVISH

Graham_Devon wrote: »

Is this Miles bloke still on the BOE board taking part in setting interest rates?

Yes.

Surely this signals they DO take house prices into consideration, with vested interests such as this.

Explain how an statement of the obvious in a research paper is a "vested interest"?

I mean, seriously, banks taking a stake of the future HPI? Coming from a BOE member? Surely this is simply outright dangerous if a BOE member is recomending banks lend on future predictions....

Why?

considering what we have just been through and the money we have had to put into the system due to property speculation!?

How much money have we had to put into the system due to UK property speculation?

Bearing in mind that Northern Rocks bad bank, containing the worst of the worst of UK mortgages, made 750 million pounds profit last year alone.

And that UK banks lost 15 times more money on overseas lending than they did on UK mortgage lending.

Would the BOE really recomend such stupidity?

Explain why it's stupid?

If we are up against this sort of stuff from Britains best, then I'm lost for words.

Yet you seem to be able to spout prolifically about how you're lost for words.

I mean, it would obviously increase HPI if people didn't have to actually pay monthly payments,

You think?

Or is it the case, as the paper states, that HPI is more or less inevitable now and it's better to find a way to enable people to buy than to keep them locked out.

but jesus wept, think of the massive problems this would create!!!

Yes.

Heaven forbid, more people might actually be able to buy houses.

What a terrible position we'd be in then.

Graham_Devon

Let me get this straight Hamish.

You can't see any problem with banks lending based on a future prediction of HPI?

HAMISH_MCTAVISH

Graham_Devon wrote: »

Let me get this straight Hamish.

You can't see any problem with banks lending based on a future prediction of HPI?

Answering a series of questions with a question there Graham....

Interesting.

kabayiri

Seems the Beeb is on a roll.

Last weekend they discussed the multi-generational household, once commonplace but which had diminished in recent times and now seeing a resurgance.

If it becomes an accepted norm to see Grampy living with parents and working children will we see new housing adapt to this reality ?

Perhaps this is another way to leverage more capacity out of precious land space ?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Answering a series of questions with a question there Graham....

Interesting.

You'll get answers to all your questions simply by answering mine.

If you answer that you can't see any problems then no matter what I answer to your questions, I'll never be correct.

If you suggest there are problems, then we can work on your questions and find what the problems are.

I think you do see the problems, but you overwhelming need for HPI takes over and you don't really care about the problems.