I heard this morning that UK house prices are now down by more than 10% so far this year. I listened in vain for a government Minister to come on to claim success from their policy. For years Ministers have told us we needed to make houses more affordable. They have become mighty shy now their policy of starving the Money markets of cash last summer and nationalising the UK’s most aggressive lending bank, Northern Rock, is delivering lower house prices with a vengeance.
Could it be that they have at last worked out that lower house prices do not automaticallly make houses more affordable, if there are too few mrotgages to buy them with? Could it be that at last they understand there is one thing worse than house prices soaring, and that is house prices falling? Aren’t we owed some explanation of their latest thinking, and some comments on where they want to take the mortgage market next? After all, they now own and manage one of the largest mortgage banks, and intervene regularly in the money markets, so much of this is down to their efforts.
We should be told by the government how much further they intend to let house prices fall before taking the necessary money and mortgage action to stabilise them. We should be told whether they think that the shortage of housing they identified in previous years has now corrected, given the lack of buyers for new homes. Does that make them want to alter their targets for new house construction, as they think new home starts determine house prices?
Commercial property has already fallen by more than 20%, twice the fall so far in houses. There is more and more empty space available as developers finish building projects in progress. As migrants from overseas return home in search of jobs elsewhere, and as people staying here give up on trying to find a mortgage for a better home, we should expect further falls in residential property prices. There will be more repossessions as people struggle to pay the mortgages they already have, forcing more properties onto the market.
No more boom and bust? That does not seem such a clever soundbite now ownership of Northern Rock and clumsy mismanagement of financial regulation and the money markets has made the UK government into an architect of bust in the property market, presiding over the collapse of the mrotgage book of one of our bigger mortgage lenders at a time of general mortgage shortage. And how does Vince Cable now think about the outcome of nationalising Northern Rock, having acted as the government’s spinner to win over fashionable opinion to such an ill judged course? Is he happy with the collapse of house prices, the shortage of mortgages and the redundancies at the Rock?