"Hmm, let’s see. Prince William’s leaving the Army or the Navy or whatever it is he does when he’s not being royal… Author Philip Pullman reckons illegal downloading is ‘moral squalor’; yeah, well, OK… surveyors and estate agents want the Bank of England to cap house price rises at 5%... Holly Willoughby’s leaving The Voi – hang on. Go back one. What was that again? Surveyors and estate agents want the Bank of England to cap house price rises at 5%? WTF? We can do that? Can we do that? WTFFFFFFFFF? What I’m trying to say is, it came as a surprise to me.
For those whose eyes glaze over at the economics news, I understand, because I was one of you once, and hope to become so again once everything becomes fantastically stable and boring once more. But a) this won’t take long, so do stay with me; and b) the last five years have really been Quite Interesting as a study of how far people will go with their shenanigans so long as you throw enough money at them and none of it’s their own, so you should dip in every now and again.
So. The Royal Institution of Chartered Surveyors (RICS), which represents surveyors and estate agents, wants the Bank of England’s new Financial Policy Committee (FPC) to use its (equally new) powers to prick the housing price bubble that appears to be inflating again like a giant boil on the UK’s bum. Yes, that boil under which festers likely unserviceable individual debts, reckless lending and the risk of negative equity spewing forth when the thing finally pops.
The FPC could act as a gentle lance by directing the Bank of England’s Prudential Regulation Authority (whose job is to ensure the banks behave in a responsible fashion) to start forcing banks to set aside more capital against certain types of mortgages if house inflation goes over 5%. This is almost certainly a case of when, not if, given that the Halifax price index showed in August that house prices have risen by 5.4% since 2012. This would make these mortgages less affordable to punters and put the brakes on price inflation – houses only ever being truly worth not what someone is willing to pay, but what they are able to pay.
The slave trade once looked natural
I don’t propose to go into the advantages and disadvantages in detail (though the latter mainly revolve around the fact it’s a blunt tool that could cause mortgages to be rationed throughout the country just because multi-millionaires are spending mad money in a few square miles of London), but rather to concentrate on the slightly dizzying change in perspective that the mere headline induced in me. Because it suddenly opens up a world of possibilities. If we can cap house price inflation; if we can put the kybosh on the gambling fever that has held the country in its grip since the Eighties; and if we can truncate the vision we have grown up with of ever-more-valuable houses as a God-given right, then surely we can do anything. Can’t we?
We could outlaw second homes until everyone’s got their own home – even the people being turfed out of theirs because they can’t afford to pay for their extra bedroom. You could tax owners of expensive properties a percentage of its value every year. Gosh, you could do all sorts.
And once you think about it a little harder, you see the possibilities everywhere. It begins to throw into relief the sheer number of rules and regulations that have become so accepted, they have taken on the status of natural law and effectively become invisible. It prompts you to examine things from a different perspective that looks back into history and into the future, rather than glancing at the snapshot that is our present.
Everything is propped up by hidden assumptions that look immutable but aren’t. The slave trade once looked natural. So did child labour and putting people in the workhouse until they died. Companies were once free to discharge all their pollutants into the air and the rivers. I actually remember the arguments in the Eighties about how regulations on car emissions would restrict drivers’ freedom of choice. Now those laws look natural too.
So too, then, can restrictions on house prices. Child labour in other countries can come to look unnatural. A living wage that keeps families off benefits – the modern version of the workhouse – becomes simply a matter of changing peoples’ minds, not the rules of finance or physics.
Keep your eyes open. It’s amazing what you can see.”