Thursday, June 25, 2009
“Housing bubbles are bad news â€“ yes, even when prices rise”
"We ought to have learnt the hard way that home ownership is not a one-way bet. Your home is now worth around a quarter less than in the summer of 2007; as a result, negative equity is fast approaching the heights seen in the early 1990s. The recovery is probably something of a mirage: prices are likely to fall further in the coming months. A sickly housing market has some years left to run. Housing bubbles are bad news â€“ yes, even when prices rise. An overheated property market prompts people to buy homes that are bigger than they really need. In future, the BoE needs the ability to control the loan-to-value levels at which banks lend to customers. Also we must reshape the tax system so that it does not favour home ownership. This may mean a land value tax...."