I was disappointed to read the recent calls from the OECD (Organisation for Economic Co-operation and Development) regarding the UK housing market, and in particular their concerns regarding a property bubble.
Unfortunately the stats point very much towards a bubble in London and the south east of England but this heat is not really spreading throughout the rest of the UK to the same extent. I think it would be dangerous for the Government or the Bank of England to restrict mortgage lending at this stage, especially with the recent introduction of the new mortgage market review rules. Having considered matters, and remembering a time when in a bid to stimulate the housing market, the Government gave relief from Stamp Duty to certain postcode areas, I would suggest that the Government brings in a premium rate of Stamp Duty for certain postcode areas on a temporary basis, and this measure could be used to control the housing market. Any area would be reviewed on a three monthly basis and the Bank of England could use statistics from the Registers of Scotland and mortgage lenders to dictate which areas are controlled in this manner. I would also suggest that any extra funds are ring-fenced and used to support the property market, especially in more deprived areas.
I think this proposal would be the best way to control a housing market that is over-heating in certain areas but lagging behind in others.Lindsay Darroch Partner – Head of Property