Last week I wrote my review of the weekend’s money pages on the booming housing market, and my support for any measures that might engender a degree of decorum in proceedings.
As a wannabe first-time buyer, this affects me directly. I’ve seen prices in my area - greater London, close to the exploding sector’s ‘ground zero’ - accelerating away at an alarming rate, and heard tales of underhand tactics by sellers struggling to comprehend their own good fortune.
So I praised the Mortgage Market Review, cheered the Bank of England, and encouraged any action regulators saw fit to take to reign in the housing hubris.
It was no surprise that a piece promoting the prudence of regulatory intervention wasn’t the most popular I’ve ever written.
Steven Farrall, an adviser known to you all I’m sure and with whom I’ve shared many an enjoyable joust, declared the article “spectacularly bad” and bemoaned by “staggering economic ignorance”.
In his view these interventions are only rendered necessary by previous and ill-considered interventions, and the best thing the regulators can do is leave well alone, thank you very much.
I still believe I’m right - and moreover I think the regulatory moves we have seen are both proportionate and working. A number of stories on housing, still the main subject of news in the qualities over the weekend, show why.
According to pieces published on Saturday in the Times and the Independent, as many as 2m first-time buyers have been disenfranchised from the property market since 2007, based on figures from insurer Genworth on expected demand versus actual purchases.
This year, based on the current run-rate, there will be around 296,000 first time buyers, more than 40 per cent less than the more than 500,000 demographic trends suggest there should be.
It is not hard to reconcile the disparity: deposits are soaring on the back of rapidly escalating prices, and more are being forced to pay higher rates on 95 per cent loans and hefty stamp duty bills. The average moving cost was said earlier this year to have risen to well in excess of £8,000.
All of this comes back to price. It is hard to imagine how anyone buys a house in London, for example, where average house prices are often quoted as being close to or even above £400,000.
According to the Times’ piece, even for a house worth £147,000, a first-timer with a 5 per cent deposit would need to be on a salary of £45,800. This is nearly double the national average.
Of course there is a regional dynamic to take into consideration. House prices have not risen anywhere near as fast outside of the south of England, particularly south-east England and London.
But the fact that young buyers are being left out in the cold is, in my view, irrefutable. House price inflation must be curtailed.
This is not about looking at what has happened in the past, but what is happening right now and how we can change things in the near-term future.
That means curbing the ability for people to borrow at ever higher multiples to meet whatever the market demands, and ensuring that purchases are broadly affordable. The regulatory actions are correct and appropriate.
They are also working: we carried a story last week from the Council of Mortgage Lenders showing that mortgage approvals fell in July and are settling at a new, lower level. Several estate agency groups have seen their share price hit after warning of a ‘cooling’ in the market.
In the Sunday Telegraph, Nationwide was reported to have sounded “one of its most cautionary notes in years on the housing market”, on the back of a fall in agreed mortgages and in the number of enquiries being reported.
This is a necessary - albeit painful for some - first step. The next is to tackle the huge sums of money that are being invested by foreign investors, often through offshore vehicles, in London in particular, and to finally tackle the dearth of development.
I suspect with an election looming, these latter issues will be at the forefront of many politicians’ minds.