Price caps are for turkeys

Did you see the headline in The Guardian last week? It read: “Estate agents and surveyors call for house price growth cap.” We’re still a few months away from Christmas – but I certainly haven’t heard any turkeys are making noises yet!

The story contains the bird-brained idea that the price of a property should be capped at five per cent per year. So if you bought a house for £500,000 this summer, you could only sell it next summer for £525,000 – even if a buyer was willing to offer you more.

The scheme is being mooted to help take the air out of a property price bubble in the housing market, principally in London. Yes, the local market is now booming, but you can’t beat the free market in this case. Sales between buyers and sellers are private deals governed simply by the economics of supply and demand.

The only way out of this is to build more homes – both flats and family houses, as well as social housing and shared ownership schemes – to provide enough supply to cool the demand in London.

So far though, that just isn’t happening. The losers are the young renters and prospective homeowners, who would love to have a place of their own to start a family or just to enjoy the stability in knowing that the landlord isn’t going to sell up and leave them rushing to find a new home.

Home ownership is a positive goal that is highly valued in our society, and here at Horton and Garton we understand this and help clients young and old make that dream a reality.

But the private sector is only one part of the puzzle. Local councils need to create sound policies and strategies on how to encourage residents to get on the property ladder. Of course, that requires properties to be built or made available. In turn this means they must work with developers to get them – or even force them – to build homes to match the needs of the local populous.

Surely this is a vote winner for years to come for young people? Politicians take note.

For me, the only other way to bring some stability back to the market is to address the booming popularity of Buy to Let investment. A property portfolio does make a good investment – especially as private pensions are looking less and less available and/or reliable – but for those with more than three properties, perhaps it would be worth creating a ‘super tax’ to fund a rebate scheme and reward first-time buyers? 

What will not work however (and is probably completely unenforceable anyway) is to limit price rises on the sale of property. It is an insult to the free market and people’s intelligence and it’s also detrimental to the thousands of local residents who pay good money to improve their properties, and thus neighbourhoods, by repairing and renovating their homes. And here I was thinking that the silly season ended in August!