I was pleased to hear in the Monetary Policy Committee statement that it intends not to raise the Bank Rate from its current level of 0.5% at least until the Labour Force Survey (LFS) headline measure of the unemployment rate has fallen to a threshold of 7%. I think this is a bold statement and will give a big boost to the property market encouraging more activity in the market. This along with government initiatives, including the Help to Buy Scheme, will further underpin an improvement in the housing market.
I have listened to criticism of both the Help to Buy Scheme and the Government statement with some surprise and think that the criticism is based on a lack of understanding. While activity levels are increasing, which will ultimately lead to a price increase, there is still a dearth of lending to the construction industry. The only way that we can deal with a housing bubble is to increase the construction of new properties and the only way construction is going to increase is if more bank lending is available to developers of all sizes. Banks will only start lending to developers again if they see the housing market stabilised and I am of the view that the Government schemes and the Governor of the Bank of England’s statement will lead to increased confidence allowing construction to move forward.
As readers of previous blogs will know I am a firm believer that a strong construction industry in the UK will underpin a general economic recovery.
I am pleased to report that the trends of May and June are continuing being reported in the housing market in July and August.
I will let you know as soon as I have further figures.Lindsay Darroch Partner – Head of Property