Ten more years of rising house prices, predicts Osborne
02-06-2014
Chancellor George Osborne says demand will push house prices higher over the next decade - but ruled out curbs to Government stimulus
For sale signs
The Chancellor has predicted a strong decade for house price rises Photo: GETTY
By Matthew Holehouse
Demand for houses will continue to exceed supply for another decade, raising the prospect of prices continuing to rise, the Chancellor has warned.
George Osborne said it will be years before there are enough houses built to satisfy the market, despite reforms to the planning system and an upturn in construction.
He also ruled–out curbs to the Government's Help to Buy mortgage scheme, which provides state–backed mortgages for houses worth up to £600,000.
He insisted that the pick up in house prices did not amount to a dangerous bubble, and said it will be 2020 before house prices return to their pre–recession peak in real terms.
The expansion in house building last month was the fastest since November 2003, according to data from Markit Economics released yesterday.
House prices experienced their biggest monthly rise for more than four years in December and rose 8.4pc last year, according to the Nationwide Building Society. Mortgage approvals are also at a six–year high.
Mr Osborne said supply will not catch up with demand for a decade because of a "historic problem" of low house building.
"I don't pretend this problem is going to be solved in a few months or a couple of years. I imagine if we were to assemble again in 10 years' time we would still be talking about the challenge of making sure that our housing supply keeps up with demand," he told MPs.
Mr Osborne said Britain is "still recovering from the property crash" and ruled out cutting the threshold for Help to Buy to £300,000, saying the majority of people using the scheme are first–time buyers outside of London, buying properties worth £150,000.
The Government's reforms to the planning system are starting to bear fruit, he added. "We have got to build more homes. We've got to create an acceptable political and social climate that people will want to see homes built so that their children have some prospect of living near their own home," he said.
Vince Cable, the Business Secretary, has called for curbs to the Government's mortgage scheme, saying there is a "raging housing boom" in London and the South East that "could get out of control" unless interest rates are raised.