George Osborne Acts To Curb Housing Bubble
Updated: 1:25am UK, Friday 13 June 2014
By Jon Craig, Chief Political Correspondent
Barely a few minutes into his Mansion House speech, George Osborne said: "So while I know this is my fifth speech to you as Chancellor, I hope it is not my last."
I'll bet he does!
But whether he's back this time next year addressing the bankers and City money men and women, or listening to Ed Balls make it, could depend on the success or not of the measures he announced in this year's speech.
He wouldn't admit it. But the Chancellor now appears to accept that the threat of a "housing bubble" in London and some other parts of the country is a potential problem.
He doesn't want interest rates to rise before next year's general election to curb house price inflation. We know that from no lesser source than Her Majesty the Queen last week.
"To strengthen the economy and provide stability and security, my ministers will continue to reduce the country's deficit, helping to ensure that mortgage and interest rates remain low," she said right at the outset of her speech at the State Opening of Parliament.
So instead, the Chancellor plans to give the Bank of England powers to curb big mortgages being offered to people who can't afford the repayments.
Excuse me, though. Aren't many of the big lenders doing that already? Some lenders are limiting loans to four times salary and scrapping loans of more than £500,000. There has been a clampdown on interest-only mortgages too.
But the price of an average house rose by £223 a day last month and by 16% over the past year. It's not as if Mr Osborne hasn't been warned.
For months, the Liberal Democrat Business Secretary Vince Cable has been warning about a "housing bubble". But until now he has been slapped down by the Tory Chancellor.
Not any more. Mr Osborne told his City audience: "If London prices were to continue growing at these rates that would be too fast for comfort."
In other words, the Chancellor now recognises what critics of his Help to Buy scheme have been telling him: there is a problem in the capital, particularly, and elsewhere.
It doesn't take a genius to work out why: demand massively outstrips supply. So Mr Osborne is proposing to relax planning laws on so-called "brownfield sites", while protecting the green belt in those Tory constituencies in the shires.
Relaxing planning laws? How many times have we heard that before from senior Conservative politicians? The "Nimbys" in the leafier parts of Britain have other ideas.
To tackle the supply and demand problem in the capital, the Chancellor is promising "new housing zones across London backed by new infrastructure". Thousands of new homes for London families is the promise. We've heard a lot about that before, too.
No wonder Ed Balls MP, Labour's Shadow Chancellor, said: "George Osborne is still failing to tackle the root cause of the housing crisis which is that we are not building enough homes to match rising demand.
"And the danger of the Chancellor's failure to act on housing supply is that we see a premature rise in interest rates to rein in the housing market which ends up hitting millions of families and businesses."
A rise in interest rates before the election? No chance, Mr Balls.
But despite Mr Osborne's attempts to cool the housing market to avoid a rate rise before voters go to the polls in May 2015, I predict the so-called "housing bubble" will lead to interest rates going up after the election.
Whoever it is delivering the Mansion House speech this time next year.
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