Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

UK housing market is on fire, warns Bank of England chief economist

UK housing market is on fire, warns Bank of England chief economist

Continued rise stoked by tax breaks and demand from well-off households likely to deepen inequality, says Andy Haldane

Britain’s housing market is “on fire” thanks to the extension of government tax breaks for homebuyers and increased demand from richer households with more savings following coronavirus lockdowns, the Bank of England’s chief economist said on Tuesday.

Andy Haldane warned that the property market was likely to continue running hot while all these factors, in combination with the central bank’s ultra-low interest rates, remained in place. He said the recent rise in house prices – which topped 10% over the 12 months to March 2021, according to official data – was very likely to worsen inequality.

“As things stand, the housing market in the UK is on fire,” Haldane said at a virtual conference on inequality organised by the University of Glasgow. “There’s a significant imbalance between incipient demand and available supply of houses, and because the laws of economic gravity have not been suspended, the result is pretty punchy rises in house prices.”

Bank of England chief economist Andy Haldane.


Haldane said the dramatic increase in prices was very likely to worsen the gap in wealth between the better off and younger generations.

Unless policymakers tackle the supply of homes, Haldane said, “inevitably we’ll see the sort of relentless rise in house prices relative to incomes that we’ve seen over the past 30 to 40 years”.

“For most people the global financial crisis came like an earthquake exposing those structural fault lines in our societies, of which inequality is among the largest.”

The chancellor, Rishi Sunak, has come under fire for pushing the cost of homes out of reach for middle-income groups after he cut the stamp duty tax on property purchases last year. The move reversed a slump in property sales at the start of the pandemic. He extended the temporary tax cut in March’s budget to the end of June 2021.

Households, many of them with people working from home, have built up around £160bn in savings since the start of the pandemic. Sunak’s tax incentive came as many of them sought bigger properties to include gardens and home offices.

Halifax said this week that house prices are likely to continue rising for some time despite hitting a new record high in May.

The mortgage lender, part of Lloyds bank, said house prices jumped 1.3% in May, and by 9.5% over the last year, taking the average selling price to a record £261,743.

Haldane, who is leaving the bank to head the Royal Society of Encouragement of Arts and Manufactures and Commerce, said there was little the central bank could do about the surge in house prices because the main influences on the housing market – tax rates, planning rules and measures to promote housebuilding – were set by government.

His comments contrast with deputy governor Sir John Cunliffe who said last month that the bank’s role as watchdog for the banking industry meant it was making sure lenders were conservative in their policies.

In a separate speech, deputy governor Dave Ramsden said the central bank was carefully monitoring the housing market as it weighed up the risk of a jump in consumer price inflation.

Haldane told the workshop that uncertainty about the prospects for Britain’s labour market remained high even though employment and vacancies had bounced back quickly from the Covid crisis.

“We’ve still got more than 3 million workers on furlough across the UK, and that means that uncertainties about the future jobs market remain pretty acute,” he said.

While government figures last week showed 3.4m jobs were on furlough at the end of April, more timely survey data from the Office for National Statistics suggested the number had dropped to 2.1 million by mid-May.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
The Country That Got Too Rich? Public Spending Dominates Norway Election
EU Proposes Phasing Out Russian Oil and Gas by End of 2027 to End Energy Dependence
More Than 150,000 Followers for a Fictional Character: The New Influencers Are AI Creations
EU Prepares for War
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
Florida’s Vaccine Revolution: DeSantis Declares War on Mandates
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
"The Situation Has Never Been This Bad": The Fall of PepsiCo
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
The Fashion Designer Who Became an Italian Symbol: Giorgio Armani Has Died at 91
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Druzhba Pipeline Incident Sparks Geopolitical Tensions
Cost of Opposition Leader Péter Magyar's Economic Plan Revealed
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
×