Leader: When in doubt, do nothing
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Housing was back on the agenda over the Christmas break as housing minister Grant Shapps waded into the debate over the Mortgage Market Review. In interviews with the Financial Times and the Observer, he developed his seemingly off-the-cuff remark at a December conference that the MMR would have stopped him from buying a house into a full-scale assault on the proposals.
Full marks for bringing the MMR’s potential perils to the public’s attention. It is not an abstract set of proposals - it will impact hundreds of thousands of home owners and would-be home buyers. But as Melanie Bien, director of Private Finance, points out on page 22, Shapps’ talk of levers should make us pause for thought. A house building incentive scheme was cited as an example of a lever that could be used to stabilise house prices but the government has admitted it will only result in an additional 14,000 homes.
The only way to stabilise house prices would be taxation, which should send a shiver down the market’s spine. The reason our housing market is starting to resemble European markets is that the lack of finance is pushing would-be buyers to the rental sector. European housing markets are skewed towards renting because of prohibitive taxes on buying properties.
It seems unlikely that the government would take such a radical step as it would probably kiss goodbye to a second term. Far better for Shapps and Prime Minister David Cameron to ensure the MMR doesn’t suppress funding further and do nothing as a lack of funding takes the edge off prices. But for them to make out that the government is shaping the market would be pure hubris. It will remain an untameable beast whatever the economic environment and no matter who is in charge.
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