Minister pledges an end to the housing price rollercoaster

Published 02nd Jan 2011

Housing minister Grant Shapps argues for using government levers to help usher in era of 'house-price stability'


The era of booming house prices, in which people saw property as an investment for retirement, is over, the housing minister declares today.

In an interview with the Observer, Grant Shapps argues that dramatic increases in the price of property cause "enormous pain" for tens of thousands of young people not yet on the housing ladder. He wants to use government levers to help usher in a new era of "house-price stability" in which prices rise very slowly and below the rate of earnings, making property more affordable long term.

"I think it is horrendous that a first-time buyer would need to be 36 on average if they do not have the support of mum and dad," said Shapps. "The main thing everyone requires for their subsistence is a roof over their head and when that basic human need becomes too expensive for average citizens to afford, something is out of kilter.

"I think the answer is house-price stability. We had this crazy period from 1997 to 2007 when house prices almost tripled, which is fine if you have a house." For others, the boom meant their aspirations to own faded away, he added.

Shapps gave the example of a "rational" market, where property prices rose by 2%, while earnings increased by 4% – meaning a real-terms drop over time.

"This government absolutely supports peoples' aspiration to own a home. But we also believe that [property] should be primarily thought of as a place to be your home."

Shapps said he wanted people to look to investments that are supposed to offer security in old-age, rather than rely on housing.

He admitted that the government was not in a position to control the housing market, but he argued there were levers that could help keep prices down, such as the Homes Bonus, to encourage building.

Shapps's vision might not sit comfortably with home-owners – or those who think the young should have the same opportunities to make money on property as the baby-boomers before them. But others were very supportive. Lord Oakeshott, a Lib Dem treasury spokesman, called high prices a "curse for the young. They transfer wealth from the young to the old and from the have-nots to the haves in society. We must end our unhealthy British obsession with owner occupation for all. We should make long-term renting, both fully commercial and in the social-housing sector, a flexible and accessible option as in Germany and Switzerland. There it is perfectly normal even for a well-off family to rent for many years, rather than buy."

Oakeshott said the only bank offering new buyers a good deal was the "bank of mum and dad" and said bank lending was failing them, having gone from "splurge to starvation".

Source: ' Observer '

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