As the Financial Policy Committee promises to be vigilant, is UK property in bubble territory?

YES

The Financial Policy Committee is entirely right to monitor the worrying changes in the housing market. But in the last 12 months, we’ve seen prices increase by 5 per cent nationally, with London prices rising almost 10 per cent year-on-year for July. At the same time, mortgage approvals have increased by almost a third. It can’t just be an accident that these increases coincide with the introduction of Help to Buy. The scheme effectively puts instant money into the pockets of buyers and stokes demand, but does nothing to directly increase supply. Developers could naturally see it as good business to increase prices, knowing that prospective homeowners have extra buying power provided by the backing of the government. We need new initiatives to free up supply. One is our housing zones model, which would stimulate supply in designated areas through a series of measures including relaxed planning regulations, tax relief and VAT exemption. Mark Henderson is chief executive of Home Group.


No

Despite recent price growth in the UK housing market, it is grossly premature to speak of a property bubble. The Financial Policy Committee was right to highlight that housing activity and loan-to-value ratios on new mortgage lending remained well below their historic averages in its statement yesterday. And turnover is little above half of normal levels. Overall, average UK valuations are down roughly 10 per cent from their 2007 peak – we face a lost decade in inflation-adjusted terms. Current high prices in London are due to scarcity and high demand, not a surfeit of credit – which is the sign of a true bubble. The market is actually being very efficient in this regard, with rising prices reflecting the fact that lots of people want to live and work in London. New buildings must reflect this, and housing policy cannot ignore the clear market signals. But talk of an overheating UK housing market is premature. Yolande Barnes is director of world research at Savills.