Lobbyists have called on the Bank of England to prevent a runaway property bubble by capping price increases at five per cent, thisismoney.co.uk reports.
In the years leading up to the financial crash of 2007, property prices were increasing at some of their quickest rates since records began. This property bubble, however, caused the resulting crash to have a much harder impact than it otherwise may have.
Now, with the property market appearing to make its way out of the doldrums once more, RICS (the Royal Institution of Chartered Surveyors) has called for a cap to be put in place that would prevent prices from spiralling out of control.
RICS said that a cap of five per cent would ensure the market remains stable and gives lenders and estate agency personnel a great deal more stability. It reached the figure by also taking into account UK income growth, which is currently set at around three per cent annually.
If the Bank of England was to take such action, however, it would need to do so rather quickly, as some reports have already put year-on-year growth in the industry at more than five per cent. The Halifax, for example, has said prices today are 5.4 per cent higher than they were in the summer of 2012. In addition, those which put prices below five per cent have said the threshold will almost certainly be broken by the end of the year.
Commenting, RICS senior economist Joshua Miller told theguardian.com that a price cap “would send a clear and simply statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise.
“We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”