Sunday, Nov 23, 2008
Housing is now a non-buy
Telegraph.co.uk: Bank will stamp down on future house price booms, says deputy governor
In what will be seen as a major about-turn by Britain's central bank, Charlie Bean pledged to do more to prevent major credit bubbles developing in the economy. He also acknowledged tacitly that central banks around the world did too little to prevent the housing boom from emerging in previous years.
His comments, made at a conference in Istanbul, are likely to have serious implications for the path of Britain's housing market in future years.
Posted by v stor @ 07:52 AM (846 views) Add Comment
13 Comments
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1. paul said...
I'll believe it when I see it - the BoE has used house prices to target growth in the economy for far too long. Is this the closest we'll get to an apology for f**king it up so badly? Probably.
If it is true, then Uncle Tom's prediction some time ago (which I agree with) that by the end of this charade a law will be passed to prevent such a housing related credit boom and bust happening will be vindicated.
2. quiet guy said...
Well we all know what Mark Wadsworth would say about this. Charlie Bean's comments just add greater weight to the land value tax argument.
Whatever the deputy governer belatedly says, I don't believe for a moment that the BoE can prevent another bubble because the political and economic priorities are so far apart. From an economic persepective, short regular recessions are probably the best thing unless you believe that it is possible to prevent the business cycle. Politically, it is obvious that the incumbents will do everything they can to postpone recessions which leads to malinvestment. During the boom years, any banker who cautioned against aggressive lending was sidelined; that will not change in future.
3. mark said...
how can they stop a boom, it is madness also as mad as gordon brown.........
4. tyrellcorporation said...
Blah, blah, blah, heard it all before after the last housing boom/bust. I remember the headlines well... 'a house should be for living in and not for an investment' etc, etc. The trouble is that politicians just can't help themselves to the feelgood factor the rising house prices generate. Politicians mostly just do things that superficially seem popular and win them votes and that those policies often flies in the face of common sense. We'll have more housing booms and busts and if anything (judging by the graph on the home page) they'll just get bigger and badder. As soon as the green shoots of recovery appear the central banks will keep the credit taps on for too long again and the next boom will be born. Ad infinitum.
Odd how the one thing that'll supposidly be good for global warming - reduced carbon emmissions through more sustainable levels of growth - is the one thing that's desperately trying to be prevented by Gordon Brown and governments the World over. It's almost like green taxes were a con all along.
5. davecrash said...
Apart from ending boom and bust Gordon Brown said in 1997 that he wouldn't let house prices to get out of control, did he not? Well done Gordon, you are doing great job so far, you deluded fool.
When or if the British economy ever picks up again and all the stamp duty starts rolling in again, any policy to control house prices will soon be forgotten about. I bet a policy like this one was discussed during the last property crash .... and the one before that.......and the one before that.......and the one before that........
The best thing to do is to just outlaw all these complex financial instruments dreamed up in Wall Street and Canary Wharf and insist that the banks adopt the good old fashioned building society model again (ie. lending bases on saver deposits). Also they should legislate that a house buyer needs at least a 20% deposit to buy a house. This would keep house prices at a nice steady, sensible and sustainable level. It would also encourage society (particularly the young) about the benefits of saving up for something instead of the ridiculous buy now, default later and go bankrupt culture we sadly have now.
6. dohousescrashinthewoods said...
I agree with the sentiments above - this is great news if it ever happens.
I think political will is against it only as long as a) we have fools in power or b) those in power busy themselves making fools of the people they are there to serve.
To expand on my assertions (they aren't just name-calling):
- A wise ruler works for the long-term good. Even I try to do this in my job - and it means doing things that are not in my interest. When I do "get away with doing the right thing" I do see good outcomes, sometimes years down the line. Apart from anything else, I can sleep at night.
- Destroying and debasing the education system, whether to keep people off the dole or to claim you're improving standards is a fool's errand, even if only because the very people you are making fools out of are the ones who will make up the nation you will grow old in.
We desperately need to combine courage and character in our leaders - courage to take politically uncomfortable decisions and character to know what the right decision is (and not default to a selfish/lobbyist option that is harmful). Let's face it, they are willing to push ID cards and road charging, against vehement dissent, so taking difficult decisions is possible, it just seems they aren't willing to use that brass-necked determination in making simple, straightforward decisions.
As I see it the political "market" selects those who are most adept at seizing and holding power, not those who want to work for the good of the nation. If that is true, then our leaders will, over time, be people who are less interested in serving the nation and more focused on keeping themselves in power. It's a bit of a truism now but it is plausible.
7. titaniccaptain said...
Well said Dave Crash
8. paul said...
Yes, I think stopping a credit-driven house price boom is one thing, stopping all booms is another.
Whichever way, Gordon Brown has failed abysmally. But also what Davecrash said. They'll be dusting off the 1970s copies of "The Bankers Manual of Prudent Lending" no doubt.
9. Will said...
Just think of all those 'my house is my pension'. No longer it seems.
10. mountain goat said...
Including house prices in the inflation calculations would help.
11. jack c said...
mountain goat said...Including house prices in the inflation calculations would help.Sunday, November 23, 2008 12:16PM
Including them when residential house prices are falling fast would no doubt suit the Government/BOE - inflation below target fairly swiftly if this was the case
12. richc said...
This statement from the BoE is meaningless. Politicians are never going to come out and say "let's engineer a housing boom" but Gordon Brown couldn't have done a better job of doing exactly that by setting up an "independent" Bank of England with an explicit inflation target based on CPI and no real oversight of bank lending practices.
13. letthemfall said...
I also am sceptical about avoiding future booms. When you think that the last bust did not prevent this one, it is hard to see how future booms will be prevented, unless society accepts much greater strictures on borrowing of the kind we had before the 80s, and decides that home ownership is a bit passe. As to whether Gordon Brown is a fool - well, if he is then he is in good company because I rather doubt any politician would have behaved differently. In the end politicians give the voters what they want, or what they think they think they want. I remember the enthusiasm that greeted the election of Margaret Thatcher; she gave us what we thought we wanted.