North East Connected

Property boss dismisses housing bubble talk

A leading property expert has played down talk of a coming housing bubble – outside of London at least.

The Bank of England this week announced that interest rates would remain at the historically low rate of 0.5% for the 80thconsecutive month, with rates now unchanged since March 2009.

Some observers have warned that property markets are “currently nearing a bubble” which could burst as early as 2017 – with some calling for the Bank to raise interest rates to neutralise the threat.

This summer, Bank of England Mark Carney warned interest rates could be expected “around the turn of this year”. The forward guidance accompanying this week’s announcement advised rate rises first rate will not be considered until deep into 2016 or later.

Ajay Jagota of North East based sales and lettings firm KIS played down talk of a housing bubble, but believes that interest rates should rise.

Ajay is also the founder of Dlighted, an insurance backed deposit-free renting solution which drastically reduces the costs for tenants finding and moving homes whilst still protecting both agents and landlords against damage.

He said: “Our research shows North East house prices actually fell by £15 last month – so if there is a housing bubble it certainly isn’t happening here.

“The media does at times have the tendency to see London issues as national ones, and although we are witnessing exuberant prices in the capital, there’s little sign of that elsewhere. Even if London’s prices did crash, it’s hard to see the ripple spreading much further than the home counties.

“I would put my neck of the line and say that you shouldn’t be worried about a housing bubble – unless you’re a Londoner.

“There have been mixed messages from the Bank of England on the topic of interest rates, putting it mildly. In July we were told to expect rises before the end of the year. Now it’s November and we’re being told it could be 2017 before they go up.

“I understand that circumstances change, causing the Bank to quite rightly rethink its positions, but for forward guidance to constantly change so dramatically may impact on the credibility of that guidance in future.

“As I’ve often said, I think we do need to raise interest rates – not because we need to cool house prices or even because it would have that effect, but because we have to rip the plaster off when it comes to moving on from near-zero interest rates and we may as well do that while our economy is relatively healthy.

“If all else fails, population growth should keep demand for houses high enough to ward off a major crash. The real problem would be if remain too low for too long and house prices becoming unsustainable if rates had to rise sharply subsequently.”

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