Should I sell or risk tenants buying at undervalue price?9:08 AM, 25th September 2019
About 3 weeks ago 48
The Royal Institution of Chartered Surveyors (Rics) want a 5% annual price rise cap for houses that triggers restrictions on mortgage income multipliers or maximum Loan to Value.
Although Rics did say that sellers under their plans would not face a limit on how much they could sell their homes for.
Joshua Miller, senior economist at Rics, wants to halt a debt-fuelled house price advance and said “the Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, 5% is one way of doing this.”
“This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”
Sir Howard Davies, a former deputy governor of the Bank, does not think this kind of cap would work and said “The problem is that we are not building enough homes.”
This is a good point as it is clearly the lack of supply that is pushing up house prices especially in the capital rather than increased demand because we are all better off now than before the recession started.
Then there is the question of regional differences. Do you smother any potential housing market recovery in areas outside London that have not seen the same rises and if not how do you tell an National high street bank to have different criteria and systems in different parts of the country.
This would be clearly unrealistic, unworkable and unpalatable for lenders.
The Housing Market is very mature and almost free to work on the pure economic principles of prices being dictated by supply and demand. It is therefore very difficult to control directly without looking at all the factors that influence it.
Rics may be naive in thinking simplistic one sided controls like this are the answer to the problems of a very complex housing market and its demographic and social issues.
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