House Price Rises Capped at 5%

Increase the supply to lower demand.

The fact is, why should developers build low-cost housing when there are plenty of luxury/premium developments being sold. There is a big demand for the high-end market, which sadly impacts first time buyers/
 
Its still a decent investment for the man on the street anyway, a house bought at 200K would be worth £255k within 5 years at an annual increase of 5%. I cant see it making any difference whatsoever.

I cant see how it can be effectively governed though, what do you do about property developers who buy dilapidated property to refurbish and sell on, what is the benchmark in that situation. It simply couldn't be the original purchase price or indeed comparables in the area.
 
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It you're going to meddle in a free market then why not meddle and try to do something about ever increasing energy prices. Might even free up some more money to fuel the housing market.
 
Cosimo said:
It you're going to meddle in a free market then why not meddle and try to do something about ever increasing energy prices. Might even free up some more money to fuel the housing market.
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Its a good point, if you are going to limit a persons return then by the same token you should also limit entirely their expenditure.

robgmun said:
That's the mindset we have to break in this country. Houses are for people to live in, not as an investment
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This is a ridiculous statement, property is an investment the world over and makes up vast investment portfolios. If property wasn't an investment then there would be an even greater property shortage.
 
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Moses said:
The real issue is the lack of new housing being built. I'd prefer them to compel developers to build when they have land and get planning permission. If they refuse to, they should be compelled to sell the land. I think the current land banks/planning permission bank is ridiculous - there's currently planning permission covering the area of Birmingham available to be built on.
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eh? If it's my land I can do what the **** I want with it. Why should I be forced to build something just because I spent £200 on planning permission? What if I can't afford it?
The problem isn't developers, it's lack of available land, green belts, planning permission and NIMBYs.
 
Classic stuff. Government meddling in the market creates a problem. Need more government meddling in the market to solve it.

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To me, it seems like a daft idea. The financial system should not be dictated by housing.

The problem is a lack of housing which compounds the problem of price. It will do nothing to solve the issue that occurred with the credit crunch.
 
Its not government, its a suggestion of the RICS to the Bank of England. Its the result of a drunken afternoon of the RICS big wigs who tired of bickering about how they no longer make money for old rope for rehashing housing valuations and surveys. It has about as much chance of getting off the ground as Eamon Holmes with feather glued to his wrist.
 
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For new buyers then I see it is a good thing. We managed to buy as the housing market was at the bottom, 4 years ago and in that time it has gone up by just over 25% in value.

With the 5% cap per year then it would be about £20k cheaper so quite a big difference considering the original value.

Either way, though, as said above, surely the those that are suggesting this should be focusing on more important issues.
 
the idea is nothing to do with the government and I don't think anyone is suggesting that individuals are only allowed to sell their house at a rate of a 5% increase per year... (correct me if I'm wrong because I haven't read it really)

misleading news articles and all that

The bbc article has a less sensationalist title
"Bank of England must limit house price booms, says Rics"

(and the article as well)
http://www.bbc.co.uk/news/business-24066371

Glaucus said:
Terirable idea.
..
b) the bigger factor is stupid mortgages ..
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You basically just said what they said
 
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kindai said:
Exactly this.

Meddling in free markets always ends badly.
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This isn't 'meddling in the free market'.

It has nothing to do with preventing people from selling their house at the true market value.

It is purely to do with creating a link between 'mortgage availability / affordability' and the 'rate at which average prices are rising'.

It is about trying to make sure that banks continue to lend at a 'steady' rate and don't suddenly start loaning out irresponsibly during a 'boom', further driving the 'boom' towards another inevitable crash.

This proposal has nothing to do with 'meddling in the free market'. You can buy a house for £100k and sell it for £150k the next year.

This is about controlling the average price increase.

LOAM said:
As its 5% annually, it wont really effect the majority of properties anyway, mostly London prices would bare the brunt of it.
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It's hard to say how it would affect individual houses, or areas, as it's not mentioned how the BoE would attempt to limit the increase. I suspect that demand in London will always be high and so it will largely be unaffected by any changes introduced.

The proposal is not saying that (for example) London's prices can't increase by 20% per year. It is just that if the prices for the whole country increase by more that 5%, the BoE will then be expected to control any lending in a way which reduces 'demand' (ie reduce availability / affordability of borrowing).
 
Zogger said:
the idea is nothing to do with the government and I don't think anyone is suggesting that individuals are only allowed to sell their house at a rate of a 5% increase per year... (correct me if I'm wrong because I haven't read it really)

misleading news articles and all that

The bbc article has a less sensationalist title
"Bank of England must limit house price booms, says Rics"

(and the article as well)
http://www.bbc.co.uk/news/business-24066371

You basically just said what they said
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Exactly, its not a feasible proposal. Vendor A will still demand £X for their property but purchaser B will only be able to borrow (property value last year x 1.05). It wont help anyone apart from the the RICS who will no doubt end up doing thousands of valuations on property purchases that then fails to get to mortgage offer.

Oh wait, I think Ive just realised why the RICS are so in favour of this.
 
It's an absolutely crap idea and if taken seriously will show we have learnt nothing from the last 5 years. Why do people insist on manipulating the end of the market rather than addressing the root problems in the first place?

Build more affordable houses to match demand and watch prices stabilise or fall within years if not months. In theory this should also cause the arse to drop out of the inflated BTL market if people can get on the property ladder more easily which is by no means a bad thing.

Buying a house is not a right by any means, of course, but neither should houses be viewed as a cushy investment offering steady gains year after year. They should be subject to the same market forces as every other investment and not artificially propped up time and time again.
 
Scougar said:
To me, it seems like a daft idea. The financial system should not be dictated by housing.

The problem is a lack of housing which compounds the problem of price. It will do nothing to solve the issue that occurred with the credit crunch.
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Yes it will (or at least could).

It is nothing to do with dictating the financial system by housing.

It is a suggestion that hopes to control lending.

Previously, when the banks saw house prices rising year on year, they started to see anyone and everyone as low risk - because if the person defaulted, the bank was confident the could re-coup their money by selling the house on the back of large short-term price increases.

So the banks lent to anyone, making house more affordable to more people, meaning that demand was higher, pushing prices up further, giving banks more confidence to lend to anyone.....and so the problems began.

This is attempting to say that banks shouldn't start lending more and more money when times get 'good', and should instead have a responsibility to limit lending and bring the increase under control (5%).

This is simply a proposal to try and control 'demand' through responsible lending.
 
LOAM said:
Exactly, its not a feasible proposal. Vendor A will still demand £X for their property but purchaser B will only be able to borrow (property value last year x 1.05).
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Can you show me where this is what they are proposing?

All I can find is a statement which says that the BoE would be expected to restrict lending (mortgage availability / affordability) if the average price increase exceeds 5% per year.
 
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