A new survey reveals misunderstanding over the reason for the UK’s house price boom and a strong appetite for the government to take action...

Property investors and immigrants top the league of villains, collectively blamed by almost a third (31%) of home buyers for Britain’s high house prices.  The main ‘culprit’, stable low interest rates and inflation, came bottom of the poll with just 6.3%. 

Twice as many people blame central government for housing supply shortage as blame local councils, yet it is usually local town halls that block residential development.

Warren Bright, chief executive of propertyfinder.com said: “10 years of low interest rates have brought about Britain’s high house prices, but this is poorly understood by most people. 

Restrictive planning policy enthusiastically enforced by local councils has severely constrained the ability of developers to provide the number of homes needed by Britain’s rising number of households, and has exacerbated the rise in property values.

High profile ‘scapegoats’

Immigrants and property investors make high profile scapegoats but are simply too small in number to be responsible. The drift to the South by the UK’s own population has pushed prices up faster there than elsewhere in the country, but that is nothing to do with immigrants and does not affect overall national average prices. In any case, the house price boom predates the recent big wave of immigrants.”

91% of the poll’s 1881 respondents expected the government to take action.  Just 9% believed the government should not interfere in the housing market.  Astonishingly, one fifth (20.5%) of respondents wanted the government to restrict immigration as a way of controlling house prices. 

18% wanted MIRAS (mortgage interest tax relief) to be reintroduced while another 15% wanted more tax to be imposed on property investors.  There was little appetite for increased housing supply – just over a tenth want the government to compel local authorities to allow more building.

Warren Bright continued: “The strength of appetite for government interference is quite startling.  And the proposed remedies are pretty extraordinary.  Immigration controls are not going to make any significant difference to house prices. 

“The reintroduction of MIRAS would no doubt be welcomed by anyone with a mortgage.  But it would only fuel the market further – a cursory glance at the dog days of Nigel Lawson’s tenure at the Treasury will confirm that.

Natural cooling

The housing market is already showing signs of cooling naturally.  Whitehall’s role should not extend beyond ensuring the smooth running of a free market.”

With confidence in the housing market now dampened, buyers and sellers expect house prices to rise just 3.9% over the next twelve months, broadly in line with wage growth.  This is slower than their expected twelve month growth rate of 5.1% during the summer and 6.1% in the spring

Warren Bright concluded: “Buyers and sellers still expect house prices to rise, just more slowly.  The housing market has responded to higher base rates and will adjust further thanks to the credit squeeze in the wholesale markets. 

For new borrowers, especially those with poorer credit records, mortgages will be harder to come by and rates offered by lenders are rising more generally too.  But with the likelihood of a further base rate rise receding, existing borrowers whose mortgages are linked to base rates (and of course for those on fixed rates who don’t need to refinance), mortgage costs will not rise. 

That’s very good for stability in the market.  We won’t see forced sellers so there is no reason to fear a sharp downturn.  The housing market is slowing in an orderly fashion and will continue to do so.  Higher base rates should now come off the agenda.”