A tale of (property market in) two cities
Cantillon: warnings of overheating London market as Dublin prices rises sharply
British chancellor of the exchequer George Osborne addresses the annual Bankers and Merchants dinner at the Mansion House in London. Photograph: Simon Dawson/Bloomberg
The Mansion House event on Thursday evening in the City of London won’t have gone down well with would-be London housebuyers, already stressed by average prices of £450,000 (€564,000), and rising. UK chancellor George Osborne (above) told the banker-filled dinner he would be asking the Bank of England to limit the amount of money home-buyers could borrow and then the governor of the said institution, Mark Carney, signalled a hike in interest rates was on the way. Combined, the two initiatives will undoubtedly knock many Londoners out of the way of the property ladder they had been planning to climb.
And of course that was the point, at least for Mr Osborne, who has apparently accepted warnings from quarters such as the IMF that something must be done to avoid an overheating UK housing market.
Such international warnings have yet to land on the desk of Michael Noonan, who recently went as far as to say he help first-time buyers to purchase their first home by guaranteeing a portion of their mortgages. But phones in the Department of Finance will most certainly start ringing if the pace of recent rises, particularly in Dublin (almost 18 per cent in the year to May), do not soon abate.
It is true that housing markets are all different, a fact acknowledged by the IMF when it inaugurated a new housing market watchdog this week. The IMF’s research has found that detecting overvaluation in property markets is “more art than science”and it points out that the tools for dealing with housing booms are still being developed, with evidence of their effectiveness still limited. You don’t say, chorus thousands of Irish homeowners.
But, says the IMF, persistence is the route to success.
“The interactions of various policy tools can be complex. But all this should not be an excuse for inaction,” it said.
Mr Noonan, fresh from the intense international oversight of bailoutville, will be hoping he doesn’t have to pay too much attention, at least for now.