Former business minister Sir Vince Cable has warned of the possibility of another housing market collapse.
He said there are “worrying signs” that Britain is “reliving the bubble of the pre-crash”.
He was one of two ex-ministers to weigh into the private rented sector within days of each other, their concern sparked by the booming buy-to-let industry.
In July, one in five home loans were to buy-to-let investors and the Bank of England noted in the record of the last meeting of its Financial Policy Committee that the stock of buy-to-let lending has risen by 40% since 2008, compared with a 2% rise for owner occupation.
Both Cable and Tory Damian Green called for more tax curbs on landlords, going well beyond the tougher new tax regime already announced in this summer’s emergency budget.
LibDem Cable said that the property market is unaffordable to most people in the country, with price rises fuelled by buy-to-let activity and lack of supply.
He said further tax measures would be necessary to clamp down on the buy-to-let market.
Cable, speaking at the Association of Short Term Lenders conference, warned that the financial crisis of 2008 had been an “economic heart attack”.
He added that we are still living with the consequences.
Green also expressed grave concerns over the buy-to-let sector.
In an interview with the Telegraph, he said there is “huge discontent” over housing.
He went on: “We need to reclaim the mantle of the party of home ownership, and to do that we not only have to build more houses but ensure that they are available for people to buy.
“Too many new houses and flats are immediately snapped up by buy-to-let landlords, and never become available for first-time buyers.
“I am delighted that we have taken the first steps towards removing the tax advantages for buy-to-let, but I suspect there is much further to go and therefore more political courage required.”
Central London agent Richard Barber, director at W.A. Ellis, said that the Chancellor’s existing plans to cut landlords’ tax breaks were unlikely to work.
He said: “In spite of the Government’s plans to cut tax breaks for landlords to level the playing field between buy-to-let borrowers and first-time buyers, the fundamentals for buy-to-let are still strong.
“Whilst yields may be affected by the reduction in mortgage relief, the shortage of new housing stock, people renting for longer, and new pension freedoms, will continue to drive this sector.”
Barber also said: “Whilst the Government may have successfully cooled the upper end of the market, their efforts to increase housing stock seem to revolve more around rhetoric than delivery.
“The increase in buy-to-let lending over the last three months is indicative of the public’s long-term faith in property as an investment.”
So the FORMER Business Minister is warning us that property market conditions are similar to the period before 2008.
No they are not. The property market crash was primarily caused by criminally irresponsible lending in the so-called sub-prime market IN AMERICA. In other words, a boom directly caused by people throwing home loans at folks who they knew could never afford to repay them. And then via Credit Default Swaps, actually insuring against them going bad!
The incredible level of prices here is mainly caused by massive demand, largely as the result of immigration, and shortage of land.
And Damian Green is a Tory?
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What about the previous 10 crashes?
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“No they are not. The property market crash was primarily caused by criminally irresponsible lending in the so-called sub-prime market IN AMERICA”
So global events caused a crash. Good thing that nothing happens beyond the sea anymore = no crashes? I think not. History has shown that events anywhere in the world could be the tipping point.
“The incredible level of prices here is mainly caused by massive demand, largely as the result of immigration, and shortage of land.”
Immigration – yes I agree with. The shortage of land is self-imposed, there is plenty of land still to go around. Only 3% of the UK is built on.
“And Damian Green is a Tory?”
The Tories have been for home ownership for decades. Owner occupiers are much more likely to vote tory. Promoting home ownership is in their long term interests.
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So being a tory doesn’t mean they are necessarily bright. Just think the Deregulation Bill in fact brought in more regulation – perhaps they thought we would not notice – plonkers! The said the Dartford Crossing would be free once the bridge paid for they lied! They then caused further congestion at the Blackwall Tunnel so they can charge (£3 per crossing proposed)! They lie and cheat like every other political party!
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The same Mr Cable who sold off much of the Royal Mail for around £1bn less than he should of. Should have been sent to jail.
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Politicians repeating common line that B2L prices out F2B. How B2L interacts with FTB market is complex but this excellent post from Bank of England gives insights that suggest it is a misconception.
http://j.mp/BoEBuy2Let
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It’s about time we had a correction. The seven year rule says to me that we have been rising since Jan 2009 in this area and probably getting close to time for a correction. What goes up must, eventually, come down. Vince Cable is the first to raise the issue but over the next few months I’m more and more will join the bandwagon.
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Is this the same “Sir” Vince Cable that presided over a totally wasted 5-year opportunity at the Dept of Business in the coalition govt? He achieved precisely zero and because his only claim to fame is that he “forecast” the last housing crash (for totally the wrong reasons) he’s obviously trying to gain some kudos by forecasting the next one. What a hero !
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It is a silly comment to be honest.
For as long as i remember the housing market has been a boom and bust cycle.
With too few properties, the strange antiquated house buying process in England and banks who change lending criteria as often as the weather there really is no choice to be boom and bust.
We are always in a bubble its just how long will it take to burst so the market corrects itself.
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But Government screwed the pensioner with attacks on pensions, The Insurance companies similarly screw the pensioners and then Osbourne thought it a good idea to release more money into circulation by freeing up pensions savings/funds when rates were obscenely low. Der! what did he expect; did he think everyone would spend their pensions of consumables to keep the economy going? Well perhaps most pensioners have been around a long time and are just a little savvy!
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