Mark Carney – Top End London Housing boom cannot be controlled by Bank of England

by Neil Patterson

16:30 PM, 17th February 2014
About 5 years ago

Mark Carney – Top End London Housing boom cannot be controlled by Bank of England

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Mark Carney – Top End London Housing boom cannot be controlled by Bank of England

Mark Carney, the Governor of the Bank of England, speaking on Sunday Morning’s Andrew Marr show said that London house prices were being driven out of the Bank’s control by cash rich foreign investors.

This has been discussed many times on Property118, but is the first time Mark Carney has directly raised it as a issue to quell fears that raising interest rates would be considered as an option to dampen this micro climate boom.

Mr Carney said, “the top end of London is driven by cash buyers. It’s driven in many cases by foreign buyers. We as the central bank can’t influence that. We change underwriting standards  it doesn’t matter, there’s not a mortgage. We change interest rates  it doesn’t matter, there’s not a mortgage, etc. But we watch the knock-on effect.”

Outside London the housing market has still not yet fully recovered from the Credit Crunch post 2008 and he went on to say. “What we’ve seen in the housing market is an adjustment from very low levels. So if you look at the level of transactions  how many houses are purchased, how many mortgages are struck  they dropped by more than 50 per cent from the average before the crisis. They’ve now bounced back, but they’re still more than 25 per cent below historic averages”

“But we have to be very conscious of the economic history in Britain, and there is a history of boom and subsequent bust in the housing market. That’s one of the reasons why the Bank of England has been given additional powers and one of the reasons as of last November we started to use those powers. So we’ve tightened up on underwriting standards, we’ve tightened up on capital standards, we’ve taken away special stimulus programmes that existed before.”

Mark Carney also defended the Government’s Help to Buy scheme, by saying its effect on the demand for property without increasing supply was “pretty small”.

This is why I think it is good for these sort of decisions to be taken out of the political sphere to avoid knee jerk reactions driven by ill considered popular demand.Mark Carney



Comments

Shakeel Ahmad

16:40 PM, 17th February 2014
About 5 years ago

Making them pay capital gains from 6/04/015 is one instrument that the revenue is using. This has little to do with the Bank of England besides the customary nudges & winks.

Neil Patterson

16:55 PM, 17th February 2014
About 5 years ago

I Quite Agree.

A nod is as good as a wink to a blind man with a deaf bat. say no more.

Mark Crampton Smith

17:30 PM, 17th February 2014
About 5 years ago

Oh........ So Johny Foreigner is going to get the blame for a housing bubble (in time for the election) as well as for taking all our jobs? Sounds like Mark Carney might have spent time with Nigel the pilot?
I am sure I read recently that percentage of overseas investors in the Prime Central London market is falling? Certainly the price hike is equity driven, but it is not only the overseas investors that have a few quid. With interest rates so low and not enough housing stock, what else are people supposed to do with their money?

Neil Patterson

19:23 PM, 17th February 2014
About 5 years ago

Reply to the comment left by "Mark Crampton Smith" at "17/02/2014 - 17:30":

I agree it is always a multiple of factors.

Mark Carney was making the point that on top end prices monetary policy would have very little effect as part of the debate was about a possible mansion tax as well.

The biggest factor in my book and I think almost indisputable but I am always willing to have a debate is lack of supply. The first rule in economics scarcity.

I think the real issue is business needs to relocate or not feel compelled to only exist in London, but that is hard until the brave few make the step.

Bravo the BBC partially moving to Manchester and I don't often complement them on a political or economic point.

If my work was in London like some of my friends I would have no choice, but I can't imagine how you get started on the ladder in the big smoke.

Shakeel Ahmad

20:50 PM, 17th February 2014
About 5 years ago

Johny, foreigner are always the punching bag for all ills. Let us not forget Mark Carney falls into the same group.

The fact that these people are injecting capital into the Country when capital is scarce, paying 7% stamp duty, maintaining or will maintain properties which most of us will not be able to afford

The fact that the Government had not built properties that an average worker cannot afford ( I am against the bribe that the developers have to pay by building social housing in exchange for obtaining planning permission. This cost is than passed onto open market buying by further stroking the prices )

It should be noted that both political party members have property portfolios and it is in their interest to create the dis balance of demand & supply.

Colin Childs

13:08 PM, 19th February 2014
About 5 years ago

London is the 5th/6th largest City in France now. A sign perhaps of tax rates across the Channel.

Neil Patterson

13:14 PM, 19th February 2014
About 5 years ago

Brilliant now we can Blame the French !

Colin Childs

20:52 PM, 19th February 2014
About 5 years ago

Reply to the comment left by "Neil Patterson" at "19/02/2014 - 13:14":

But think of the Euro's they are spending in the Uk and tax they are paying!


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