Delaying the inevitable
The UK property market is a mess. Even the biggest property bull would have to admit that. I’m not talking about the fact that house prices are falling again (down 1.2% on the year to May, says Nationwide – which is more like 6%-odd if you take inflation into account). I’m talking about the fact that there are barely enough transactions taking place for it even to be described as a genuine market.
The number of approvals for new home loans fell to just above 45,000 in April. That’s down 8% on the year. Far more importantly, it compares to a November 2006 peak of nearly 130,000. Make all the excuses you want about Easter falling late in April, or Pippa Middleton distracting the British population from obsessively house-hunting for five minutes – the fact is that compared to even the pre-boom days of the mid-1990s, the British housing market is critically ill. Indeed, it’s on life support. And it’s the Bank of England that’s keeping it there.
It’s hard to condemn the Bank. By holding the base rate at 0.5% it has staved off a wave of repossessions, and given the banks breathing space to bolster their balance sheets by refusing to lend to anyone else. That sounds like a result. But the trouble is, just as the European Union is trying to put off dealing with the Greek problem by pretending it’ll be able to repay its debts at some point in the future, so the Bank’s efforts may simply be delaying the pain.
• Read the full editor’s letter here: Delaying the inevitable