UK housing market is a bubble with Help to Buy pushing up prices, warns bank strategist

The UK housing market is a “bubble on a bubble” – and property prices, reported this morning to average over £302,000, are over-valued by around 12%.

The ‘bubble’ warning comes from Societe General global strategist Albert Edwards, who says the bubble has been inflated by a decade of loose monetary policy and, in particular, Help to Buy.

Edwards said: “What you are doing is lending them [buyers of new-build homes] more money backed by the taxpayer to push up house prices even more.”

He said that while US house prices had corrected back to normal levels after the financial crisis of ten years ago, the UK housing market had become a “bubble on top of the previous bubble”.

He said that the housing bubble could burst in the next recession, which he believes would also wipe 80% off the value of equities and herald a new “ice age”.

Edwards, who works for the French bank in London, said that it was a damaging myth that it is a lack of supply that is causing the UK housing crisis.

He blamed the “free money” of Quantitative Easing and Help to Buy, which he told yesterday’s Telegraph had been implemented under “that moron” George Osborne.

Edwards said: “There’s a lot of stock there that could just be dumped on to the market. Nothing engenders selling more than falling prices.

Under Help to Buy, purchasers of new-build homes need put down only a 5% deposit, but can take out a 20% government loan to bring the total deposit to 25%. They are not charged fees on the loan for the first five years, but must then start paying interest. When the home is sold, the Government will reclaim its 20% stake plus a share of any increase in value.

Meanwhile the International Monetary Fund says that house prices in some of the world’s largest economies, including the UK, could be over-valued by as much as 12%, and separately this morning the Daily Telegraph’s front page story was a call to cut Stamp Duty “to end our housing disgrace”.

Boris Johnson said Theresa May should cut “absurdly high” Stamp Duty and abandon affordable housing targets that developers currently have to meet.

The LSL Acadata survey reported this morning that the average house price in England and Wales now stands at £302,251 after a tiny monthly fall of 0.2%.

The figure, for July, is still up 1.6% on an annual basis.

In London, the average property price is £625,529 with annual falls in 21 out of the 33 boroughs.

Transactions during the month were an estimated 75,000, 2% down on June. In the first seven months of this year, transactions are thought to be 4% down on the same period last year.

There was also a 7% drop in sales in the second quarter of this year.

  • In today’s Telegraph, Boris Johnson says that the proportion of owner-occupiers aged between 25 and 34 has “plummeted to 39%”. However, the Halifax says that first-time buyers now represent 51% of the market and has also reported that Help to Buy has been a significant factor in the rise of first-time buyers – see our next story today.



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  1. Moveaside01

    It’s all very simple, developers know the punters are going to have more money available thanks to Help to Buy, so they hike up prices! What did Osborne think was going to happen?

    Its just yet more credit, have we learnt nothing since 2008?

    1. ArthurHouse02

      Nothing ever changes, because it doesnt matter to those in power. Help to buy, first time buyer stamp duty exemption etc, all help push prices higher. Moving home should always be about being able to afford to, if you cant, then you dont. Help to buy was never about the economy but about Tory party friends who needed their income stimulating.

  2. Hillofwad71

    In London there has been a 2 tier market development taking place  in new apartment blocks below the £600k threshold .Many apartments physically completing  this year  have been bought off plan 2 years prior  to completion some before Brexit and the April 2016 tax changes for private investors.

    The Help 2  Buyer has only been allowed to come on board 6 months prior to  physical completion because of the rules  so effectively has been left in the starting traps ,Developers have reduced prices which are slightly above the £600k threshold below to get them away to these newly arrived buyers.

    Anyone who has bought now looking to offload the same apartment in the same block is unable  to assign   to these buyers as its deemed second hand ,breaching the rules.Help 2 buyers have to buy off the developer  So those looking to sell have a restricted market those who don’t need any  financial help .in addition the individual investor both domestic  and foreign has gone quiet depressing prices the Help 2 buyer filling the  gap.


    Of course  once the  Help 2 buyer has bought  from the developer the apartment  becomes secondhand they are in the same boat and their 5 % equity soon gets eradicated bang into negative equity

    Although mortgage valuations will  be taking this discrepancy into account  slightly more relaxed that after the poor sap says goodnight to their 5% equity the Gov’t will  be in line to take the next 20% hit !

  3. James

    Couldn’t agree more with this article. If government intervention alters the course of the cyclical economy, then you are just kicking the correction in to the long grass.This stems from Gordon Brown’s motivation to end boom and bust.What with though – boom and more boom? If that direction is followed then the day of bust, bust will surely follow?

    Some will blame Brexit no doubt, but we have been staring down the barrel of a property crash for a long time now. My view wont be popular but it could even be even worse than that of 1989 to 1995 crash, where prices dropped more than 25%. Hold on to your hats.



  4. Mark Connelly

    His observation re Osborne is spot on. However his assertions that we are in a bubble I think is only party correct. Is there are bubble at the £1 million mark? Doubt it. Is there one at the  FTB price level? Yes for sure. When you steal tomorrows buyers and bring them forward to today then you create a bubble.

    You could argue that in 2008 when banks pulled lending and mortgage lending criteria was changed ( Horses and stable doors ) that the natural market was manipulated in a negative way. If people and developers are having their properties repossessed and buyers can’t buy because banks won’t lend then you have created a trough that may not necessarily have existed without these deliberate changes.

    When my mortgage criteria was 3x times income my mortgage rate was 12%. Today I could easily afford a much higher multiple  with interest rates where they are, as my mortgage to income payment would still be less now than it was back then. It’s just not as clear cut as economists would have you believe.

  5. LordElpus56

    I never understood why Help To Buy was only available on new developments. This doesn’t help anyone except developers, and therefore does absolutely nothing to put the bottom of the chain in place.


    Getting the market started again could be very simple…

    – If you really must do help to buy, it needs to be available to all FTB and FTM on any property. Personally I’d like to see it scrapped altogether in favour better lending.

    – Flat rate of stamp duty at 0.5%, which every buyer and every seller pays. It’s affordable – if you can’t afford it, you shouldn’t be buying.

    – If there really is a housing crisis, then stop alienating those who ease it – the private landlords. Reverse the excessive taxation and stamp duty surcharge. If we really do want to raise standards, ensure the rules regarding fitness to let are enforced.

    1. PeeBee

      There WAS a very watered-down HelpToBuy Scheme introduced for pre-owned homes, LordElpus56 – but it didn’t last long!

      1. CountryLass

        I used one of the early ones in 2005 to buy my first place. 10 years later I sold it and paid back the 25% with just enough equity to pay moving costs, have a deposit and enough money to buy appliances that we had fitted at the old place.

        For those looking at a property as a home for years, the old one worked. This new, new-build only one was a cr*p idea from the start.

    2. AgentQ73

      Help to buy ISAs are available for any property.

      1. LordElpus56

        I get that, but it’s bit like receiving an elastoplast from the government when you’ve just chopped your arm off.

  6. Estate_Agent_Memes

    Osborne’s stamp duty and landlord’s mortgage interest relief changes need to be reversed ASAP – THESE are the biggest problems facing the housing market across both the sales and rental sectors. Only the mega wealthy are not affected by these changes as they already have no BTL mortgages/finance to worry about and the extra Stamp Duty is water off a duck’s back! It’s almost criminal!!


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