Surveyors say house prices could become unsustainable in 2014.
Sales per estate agent are the highest for six years and the supply of new homes is nowhere near enough to meet rising demand. The first health check of the property market from the RICS in 2014 could hardly have a plainer message: this is going to be a rip-roaring year for the property market.
Mark Carney is relaxed about this. Indeed short of breaking into the Stevie Wonder song, Don't You Worry 'Bout a Thing, he could hardly have sounded more relaxed when giving evidence to the Commons Treasury committee. Sure, the governor said, activity was rising, but it was still running at below its historic average. No question, prices were rising faster than earnings, but they would only do so for the next 18 months. The Bank is on the case, monitoring debt to income ratios, the underwriting standards of lenders, household balance sheets, the whole caboodle. A slightly less chilled approach from the governor would not go amiss. It is not just that the UK has form over housing bubbles. Nor is it that there are the classic signs of phase two of a bubble, the rippling out of house price increases from London to the rest of the country. It is that this bull market began with household debt as a percentage of disposable income at close to 150%, only marginally lower than the 175% at the peak in 2007 and much higher than at the start of the last cycle. Rising house prices will result in households taking on more debt, leaving them exposed to even modest increases in interest rates. Carney has been caught out by the strength of the labour market. He appears to be making the same mistake with the housing market.
guardian.co.uk © Guardian News and Media Limited 2010
image: © World Economic Forum