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George Osborne: Bank of England can act to cool housing market George Osborne: Bank of England can act to cool housing market
(about 2 hours later)
George Osborne has suggested he will not intervene to try to tackle a housing bubble, despite growing concern that spiralling property prices could lead to a crash.George Osborne has suggested he will not intervene to try to tackle a housing bubble, despite growing concern that spiralling property prices could lead to a crash.
He said responsibility to cool the housing market lay with the Bank of England, which he said should not hesitate to use its powers to ensure economic stability. He said the government should "let them make the assessment" about the housing bubble.He said responsibility to cool the housing market lay with the Bank of England, which he said should not hesitate to use its powers to ensure economic stability. He said the government should "let them make the assessment" about the housing bubble.
House prices have leapt 8.5% over the year to April and now stand at an average of £177,648, while sales have lifted to their strongest levels in six years.House prices have leapt 8.5% over the year to April and now stand at an average of £177,648, while sales have lifted to their strongest levels in six years.
Three former chancellors have raised concerns that the government's Help to Buy mortgage scheme could create problems in the market. Lord Lamont, who was chancellor of the exchequer under John Major, said Osborne was well aware of the potential problems with the programme.Three former chancellors have raised concerns that the government's Help to Buy mortgage scheme could create problems in the market. Lord Lamont, who was chancellor of the exchequer under John Major, said Osborne was well aware of the potential problems with the programme.
Osborne told BBC Radio 4's Today programme: "Housing has always been a real challenge for Britain and a problem in the British economy because the supply of housing has not matched the demand for housing.Osborne told BBC Radio 4's Today programme: "Housing has always been a real challenge for Britain and a problem in the British economy because the supply of housing has not matched the demand for housing.
"Now, the answer to that is to increase the number we build to make sure that families can afford to get on the housing ladder but I have also given the Bank of England tools to intervene in the housing market to ensure economic stability."Now, the answer to that is to increase the number we build to make sure that families can afford to get on the housing ladder but I have also given the Bank of England tools to intervene in the housing market to ensure economic stability.
"They should not hesitate to use the tools that I have given them if they think it will help with economic stability. That's for them to make the judgment but let's not repeat the mistakes of the past, let's make sure we have learnt those lessons.""They should not hesitate to use the tools that I have given them if they think it will help with economic stability. That's for them to make the judgment but let's not repeat the mistakes of the past, let's make sure we have learnt those lessons."
Asked if he would intervene, he said: "Mark Carney [the Bank of England governor] and the financial policy committee are very qualified people to make this judgment and my job as the chancellor, the job of parliament, is to give the Bank of England the tools to do the job. Let them make the assessment."Asked if he would intervene, he said: "Mark Carney [the Bank of England governor] and the financial policy committee are very qualified people to make this judgment and my job as the chancellor, the job of parliament, is to give the Bank of England the tools to do the job. Let them make the assessment."
But despite prices last month rising at the fastest pace since the start of the financial crisis, the Bank has played down concerns that the market is overheating. However, one of its deputy governors, Jon Cunliffe, has said it would be dangerous to ignore the booming house prices.
The house price boom is expected to last for at least another two years, according to the National Institute of Economic and Social Research (NIESR). Property values will increase by 7.8% this year and 4.2% in 2015. The rise is predicted slow to 0.9% in 2016, with almost no movement in prices in 2017 and 2018.
An analysis of Land Registry by Nationwide found that prices in London have risen by nearly a fifth over the past 12 months, and are now 20% above their pre-crisis peak.
The building society said that the proportion of sales of homes in London that cost more than £500,000 had jumped from 13% in 2007 to around 25% in 2013. For properties valued at over £1m, the figure has more than doubled, from 3% to 6.5% over the same period.
Nationwide's chief economist, Robert Gardner, said last month: "The gap between house prices in London and the rest of the UK is the widest it's ever been, both in cash and percentage terms."
Property values in Manchester have also surged. Nationwide's analysis found that prices were up by 18% year-on-year.