Political intervention is harmful

A leading Danish economist has warned that political intervention in the housing market can have a harmful effect.

Speaking at the European Mortgage Federation conference in Brussels last week, Sune Worm Mortensen, chief economist at RealKredit Denmarket, told delegates that over the past 20 years in Denmark all the major shifts in house prices have been as a result of political intervention.

For example, in 1987 his nation’s government introduced tax reform which resulted in increased payments by home owners. In contrast, and on a positive note, Mortensen claims the introduction of interest-only loans in 2003 was the single factor contributing to the growth rate during that year.

Mortensen says: “Political intervention can be good for the market as long as it isn’t just a political agenda driving it.

“Fragile materials such as glass can be shaped to create something useful to drink out of, but the housing market is fragile so political intervention must be measured and well placed.”

In the UK, the government has come under repeated attack from the industry for introducing legislation such as Home Information Packs and Home Condition Reports, which pundits claim could have a negative effect on the housing market and prices.