BOE: "Not our job to regulate house prices"

HAMISH_MCTAVISH

Not our job to regulate house prices, says Bank of England policymaker

A Bank of England policymaker has said it is not the central bank’s job to regulate house prices, just hours after research revealed that values in London had jumped 10pc in the past month.

Martin Taylor, an external member of the Bank’s Financial Policy Committee (FPC), said he was “astonished” by the Royal Institution of Chartered Surveyors’ suggestion last month that the FPC should cap house price inflation at an annual 5pc.

“I don’t think, personally, that it should be the FPC’s job to stop house prices going up,” Mr Taylor said at a business lunch in Wolverhampton on Monday.

“Indeed, if you have an economic recovery, rising numbers of households and very tight supply – all of which we seem to have at the moment – it would be surprising if they didn’t.”

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10395407/Not-our-job-to-regulate-house-prices-says-Bank-of-England-policymaker.html

shortchanged_2

Well who should be responsible for maintaining sanity in the housing market?

Can anyone else do such things as rise interest rates etc?

Unless the BoE give responsibility of setting the IR back to the government then they do have a level of responsibility.

theEnd

It's strange that it was their job to regulate house prices (QE) when they started falling.

michaels

theEnd wrote: »

It's strange that it was their job to regulate house prices (QE) when they started falling.

Perhaps because falling house prices could make banks insolvent whereas rising house prices won't.

The bank has a remit to consider asset price bubbles but are house prices a bubble when they are driven by underlying supply and demand.

As I think everyone now realises, the answer is simple, supply must be allowed to increase and yet the political arithmetic does not support this. Given that the economics do not seem to be able to drive an increase in supply will the politics ever do so - will releasing land for house building ever become a vote winner, is there a level of prices so high that more people will want to see more houses built than benefit from the status quo?

Perhaps after the next crash and yet when there is a crash making it easier to build more homes seems to be the last thing on the agenda.

I have suggested removing the capital gains tax releif from family homes as currently the benefit of 'scarcity' goes to those already with housing assets which is both highly regressive and gives a strong incentive for those with 'a stake in socity' to resist home building. The tax could only be payable on death or when wothdrawing housing equity (ie sell and buy for just as much and you don't crystalise the gain and pay tax, sell and stay out of the market for a while before buying again and have a tax credit that can be reclaimed when buying again etc).

Loughton_Monkey

It is certainly not the BOE's responsibility to interfere with the free market in anything, let alone house prices.

It's job, amongst other things, is to interfere with or regulate the stability of our banking system.

The fact that so many houses are bought with a bank mortgage, means that the two things are inextricably linked. But BOE can only control the stability of the bank.

Imagine you give your teenage daughter £25 a week with which to go out in the evening and enjoy herself. Your neighbours tend to do something similar. You see local pubs losing money and closing down. You and your neighbours agree that a "Help to Enjoy" scheme would be good for your children, and the pubs, so you all increase the allowance to £30 a week.

So the town's streets are full of teenagers drinking, clubbing, and having a good time. All the pubs and clubs hike up their prices because they are getting full. Do you seek to go and persuade the bar owners to reduce prices again? No. It's neither possible, workable, nor desirable. New clubs open and create competition so maybe you don't need to. You simply control the supply of money to your daughter, so she still only has £30 to spend. Or even reduce it back down to £25. Eventually, local pubs and clubs will have to address a fall-off in demand by lowering their prices or at least not increasing them. Supply and demand eventually finds its own level.

You are controlling the money supply. Not the market.

wotsthat

shortchanged wrote: »

Well who should be responsible for maintaining sanity in the housing market?

As the man said - it would be somewhat surprising if prices didn't rise given there's an economic recovery, tight supply, increasing households and, on top of that, an apparent loosening of mortgage credit.

Since the economic crisis more people seem to be closer to hysteria about whatever the media tell them is the issue of the moment. Take your pick - Greece, Cyprus, housing bubble, housing crash, help to buy, Syria, debt ceilings, zero hours etc. etc. etc.

shortchanged_2

wotsthat wrote: »

As the man said - it would be somewhat surprising if prices didn't rise given there's an economic recovery, tight supply, increasing households and, on top of that, an apparent loosening of mortgage credit.

Since the economic crisis more people seem to be closer to hysteria about whatever the media tell them is the issue of the moment. Take your pick - Greece, Cyprus, housing bubble, housing crash, help to buy, Syria, debt ceilings, zero hours etc. etc. etc.

Don't you get a sense of deja vu though?

It looks as if nobody has learnt from the mistakes of the previous decade. We are potentially having a property led recovery, instead of a genuine recovery. It all has the potential to end in tears for many again.

theEnd

michaels wrote: »

Perhaps because falling house prices could make banks insolvent whereas rising house prices won't.

The bank has a remit to consider asset price bubbles but are house prices a bubble when they are driven by underlying supply and demand.

It's got very little to do with real underlying supply and demand. Otherwise rents wouldn't be falling in real terms. Even relative to wages and even in London.

It's got everything to do with the supply of money. Initially the banks over leveraging and hugely inflating the broad money supply. Then the central banks printing (QE) to hugely inflate the narrow money supply. Now the government underwriting huge amounts of mortgage debt (both new and old) HTB2.

It will not end well. Might not even be a house price crash, but further currency collapse, hyper inflation or even state failure.

wotsthat

shortchanged wrote: »

It looks as if nobody has learnt from the mistakes of the previous decade. We are potentially having a property led recovery, instead of a genuine recovery. It all has the potential to end in tears for many again.

It would seem unusual that there wasn't a 'real' recovery of sorts - generally people getting worse off seek to pay less for housing and not more.

Yes it'll end in tears for some. Don't you rather suspect that it'll be the same old people that have been crying for the whole of their adult lives - they'll continue to compound their mistakes of the last decade by either making more of the same or dreaming up new ones to make.

Do you know any successful people? Haven't you noted they tend to be successful whatever the direction of the economy?

Conrad

shortchanged wrote: »

Don't you get a sense of deja vu though?

It looks as if nobody has learnt from the mistakes of the previous decade. We are potentially having a property led recovery, instead of a genuine recovery. It all has the potential to end in tears for many again.

The economy is improving across all sectors including manufacturing and the export trend is very encouraging.

House prices have a long way to go, and in time there will further declines, but so what, that's what markets do, to expect anything else would be a little infantile really.

We talk about the crash as if there was no upside, yet huge numbers of people benefited from property down the years and a tiny minority lost their home.

shortchanged_2

wotsthat wrote: »

It would seem unusual that there wasn't a 'real' recovery of sorts - generally people getting worse off seek to pay less for housing and not more.

Yes it'll end in tears for some. Don't you rather suspect that it'll be the same old people that have been crying for the whole of their adult lives - they'll continue to compound their mistakes of the last decade by either making more of the same or dreaming up new ones to make.

Do you know any successful people? Haven't you noted they tend to be successful whatever the direction of the economy?

Of course wotsthat, it's the old adage money makes money.

Those who have got money inevitably make more as they are the ones who can afford to take risks as they can take a hit if it does go wrong.

But where does this leave the average joe, your shop workers, cleaners, lower paid workers? The economy needs them otherwise we cease to function, yet some people really don't give a stuff about them and the their simple answer is always, 'get a better job then.'

However it's not all that simple. Society is made up of people of differing abilities and not everyone is cut out to be an investment banker.

I would love all low paid workers one day to walk out of work for a few days and see the consequences. You'd soon see this country come to a grinding halt, yet these people are belittled and demeaned all the time.