The RICS Statement on House Price Inflation – Opinion
Like politicians telling us what our kids can eat for breakfast, the Royal Institution of Chartered Surveyors have joined the command and control bandwagon it seems.
On Friday it announced that it believes that the Bank of England should intervene in the housing market to control values, resorting to statutory measures that would dictate varying loan to value percentages and the amount of funding available, the organisation advocates harsh controls that would kick in when property values rose above 5% per annum.
See the report here
This is instead of buyers and sellers themselves, you and I in other words, dictating the market naturally.
Notwithstanding this sinister interference in a free market, I wonder how this would be administered? How much would it cost to administer? Who would fund this? Who would set the ongoing ‘appropriate’ value thresholds that trigger the intervention? And who would know at exactly which turn of the funding tap, things would be certain to fall back in line?
More questions than answers it seems and especially when the rather compelling issue of regional price variations is considered. The current housing market is in full sprint in London. Yet in, say, North Wales, it is walking at best. As ever and as often under-reported, the UK housing market is fragmented to say the least. How would the Bank and its RICS advisors handle these mass gaps in geographic performance? Will they apply some form of ‘macro-interference’ at different concentrations from one region to another? Plus, which indices will they rely upon? The HM Land Registry numbers? Or the Halifax? The Nationwide Building Society’s? Or that of the Department of Communities and Local Government? they are always contradictory and so this is yet another fundamental flaw in this philosophy.
I started writing this blog on the basis of disagreeing with the premise of anyone, Government or otherwise, dictating Karl Marx style how high the price of my house should rise. Perils accepted, I’d rather take my chances on an un-manipulated market, warts and all. At least I know that any failings in that market are natural, liable to sort themselves out by way of supply and demand balance and NOT at the behest of a banker (as we trust them so much nowadays) or a sharp suited surveyor with a vested interest in planning fake stability into their property business over the next ten years.
Such an otherwise communistic edict should send shivers down the spine of anyone with an ounce of libertarianism about them.
Far be it for me to presuppose, but with surveyors picking up the lenders’ shortfall in costs in the event of repossession value disputes, perhaps the RICS is just protecting its own back as opposed to being genuinely constructive and concerned about the roller coaster of property prices year on year?
Russell Quirk is founder and Chief Executive of eMoov.co.uk, the UK’s largest low cost estate agent