As we contemplate a new year, the Government exhibits no sign of being able to tackle just about the biggest domestic issue it faces: the housing crisis.
The latest to lend his view is my pal and fellow Fulham FC devotee, Gerard Lyons.
The ex-Standard Chartered chief economist, now economics adviser to Boris, says we should move away from our obsession of owning a home.
“A country can’t get rich by selling property to one another or to foreigners.
“What’s disappointing is that we have an economy where people think the only way to save for their pension is to buy property,” he adds.
“I can’t stand the phrase getting on the property ladder. It’s completely wrong for the country.”
"The only way I can foresee some sort of order being restored is by raising interest rates."
Chris Blackhurst
Hear, hear.
Prices, in London certainly, have to come down. That may happen, given the level of building now and planned for the near future. Supply at the top end will outstrip demand.
You only have to look at the towers and cranes at Vauxhall to guess where the bubble will burst. While that may inject some sense into a market that has gone crazy, it won’t be enough.
It may drive away the speculative foreign buyers but we will still need a great deal of convincing of an alternative income source.
The recent boom has taken place in a period of low interest rates. Rich people have been able to borrow, in order to buy, at minimal cost.
The only way I can foresee some sort of order being restored is by raising interest rates.
They’ve been so tiny as to drive savers away from cash and into income-yielding property: buy-to-let, despite the Government’s best endeavours, continues to boom.
The pendulum needs to swing in favour of savers. For too long, they’ve endured negligible returns — forcing many to alternative income streams such as buy-to-let.
Increasing rates would take the heat out of the buy-to-let market, and the overall housing market. While it would also make borrowing costlier and would hit first-time buyers, hopefully that would be more than matched by the fall in prices.
Something has to give — and apart from Government intervention on a grand scale (a cap on land values, say) — it’s difficult to see where the process can begin.
Raised interest rates, together with the Government delivering on its promised housebuilding programme, could see the tide begin to turn.