Advocate: Should the government to set a 5 per cent cap on house price rises?

Yes – Steve Buttercase, IFA at Sense Financial Solutions

While I fully accept the difficulty in imagining how it could ever be achieved, I actually like the idea.

We have a society on the brink of collapsing under the infrastructure pressures that result from an imbalance of wealth – so many issues are direct results of the consequences of poverty.

Article continues after advert

Sadly post-RDR very few advisers can do much about it but I wish we could and I wish we would.

Too much power and wealth is controlled by the property owning class at a time when we have a growing housing supply problem. The gradual reduction of social housing and a plethora of artificial stimuli for the private housing market has fuelled a crisis that could now explode in the faces of the next generation. Once again the baby-boomers are sitting pretty.

But how could we cap house price inflation at 5 per cent?

Well, if it was simply a ‘desired outcome’ and therefore controlled by the Bank of England it could actually be simply a series of targeted fiscal nuances and tweaks based on economic forecasting – similar to the control of price inflation.

An indirect control of house price inflation could be achieved through a policy of more social housing. specifically built on brownfield sites – expensive, but if it alleviated the deplorable growth in homelessness and the seemingly endless increase in so called ‘slum landlords’, let alone the longer term financial consequences on health, crime and welfare of both, it may just pay for itself.

A more radical approach could be through taxation, which I favour. The introduction of a mansion tax and the removal of CGT exemption for owner-occupied properties could be offset by an exemption allowance per individual and a much higher rate of tax on profits above a threshold. This could indirectly limit house price inflation and in a way more acceptable to the political right because it allows for the free movement of the market, albeit a controlled one.

No – Scott Gallacher, chartered financial planner at Rowley Turton

I doubt I was the only one recalling Gordon Brown’s famous ‘end to boom and bust’ speeches when I first heard of the Royal Institution of Chartered Surveyors’ proposal to cap house price growth at 5 per cent per annum

The government’s history of trying to control or fix prices is hardly an overwhelming success, whether it is wage controls in the 70s or more recently the Bank of England’s 2 per cent inflation target.

I doubt any government would genuinely restrict people’s borrowing capacity or limit property prices in the run up to the election, or shortly thereafter. No one wants to be a party pooper; consequently half the time the government would not be following this policy.