Flint: Property boom unsustainable

Published 04 July 2008

Housing Minister Caroline Flint concedes the booming housing market that Britain has enjoyed for more than a decade is "unsustainable"

Opposition politicians have accused housing minister Caroline Flint of a major gaffe after she admitted that the housing market has suffered an “unsustainable property boom”. The admission undermines Gordon Brown’s promise that Britain would not return to “boom and bust”.

Shadow Housing Minister Grant Shapps said: "We applaud Caroline Flint's honesty and welcome the fact she has come clean and admitted Labour are responsible for the instability in the housing market. We are glad the Government has admitted that they have failed first time buyers and families. Labour's big failing is that they failed to put anything away to fix the roof when the sun was shining and the public are now paying the price.”

Liberal Democrat Lembit Opik said: "It's good that Caroline Flint realises the boom couldn't last for ever. But after the boom comes the bust.”

Setting out proposals to deliver affordable housing and preserve capacity in the building industry, Flint said that without them there was a real risk of “another unsustainable property boom, making homes even more unaffordable for first time buyers and growing families”.

A spokesman for the department for Communities and Local Government did not deny that Flint’s comments related to the recent state of the housing market, although he said they referred to the need to address “longer term affordability”. The comments appear to signal a significant change in emphasis for the government, which had previously insisted that the fundamentals of the market were sound.

In May, Flint inadvertently revealed her briefing papers for a Cabinet meeting to a photographer. Her notes included a comment on the housing market: “We can't tell how bad it will get.” In an interview for the Times last week, Flint sought to distance the government from the slump. But she had to correct herself after describing the current situation as “terrible”.

Both the Tories and the Liberal Democrats criticized Flint’s proposals. Shapps called for the government to “take our lead and axe stamp duty for first time buyers on properties up to £250,000 and ditch HIPs (Home Information Packs ).”

Opik said: “We haven't seen much action to help families who stand to lose their homes. We’ve made suggestions ranging from affordable rented housing through to shared ownership schemes to prevent homelessness. I hope the Minister will take these proposals seriously. The alternative is repossessions, homeless families and all the misery which goes with it."

A spokesman for Communities and Local Government said: "The Minister was making a general point about property booms - for example like the one we saw in the late 80s.The credit crunch is affecting house prices not just in the UK but in other parts of Europe and the USA after sustained rises in recent years. It is important to recognise that demand for homes is going to increase, not decrease, and if house builders are not ready for when the market picks up we could see homes becoming even more unaffordable for first time buyers. "

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5 comments from readers

antileft
05 July 2008 at 14:53

Well, DUH!!!

Roland Baker
05 July 2008 at 16:41

Broon the builder. Can he fix it? No he can't. Does Broon remember the good old days before he was responsible for financial services regulation?

Once upon a time, in a land far away, you had to join a building society and save up for a deposit to get a house using a mortgage. The Building Societies, like Bradford and Bingley and Northern Rock, were encouraged to open themselves up to more dynamic business opportunities than fuddy duddy Building Societies. So they demutualised.

Did I hear Broon complaining when Abbey National demutualised followed by a holocaust of others? No I did not. All he did when he took over Financial Services regulation was help the FSA destroy Standard Life to make sure with profits went the same way as the housing market.

It comes so late to Caroline Flint to realise that property prices are not a one way bet that she is hardly fit to be a minister. When will she realise that those building societies that stuck to their last now have more robust business models and fewer properties in possession than the joint stock banks?

Would this signal a return to the traditional function of mutual financial services as a way to avoid housing boom and bust? I doubt it. Nobody in this Government has the skills.

Rex Burr
06 July 2008 at 11:03

Rex Burr

The insurance calculation for rebuilding cost is £1000 per square meter. An average semi is 100 square meters. Add on £20000 for a tiny patch of land and £10000 for service connections and a three bed semi should sell for £130000. Anything above that is profiteering.

Anyone with a brain between their ears knows that the recent farce in property pricing is unsustainable.

I cannot get my head around the concept that if food and fuel increase in price, that is inflation and is bad, but if property prices increase that is not inflation and is good.

Brown has monumentally failed future generations of aspiring homeowners.

I speak as one who paid off the mortgage 20 years ago and regret that fewer of my fellow countrymen will, in the future, ever be in that position.

Frank Fields
06 July 2008 at 15:46

It was an epic con game: to fiddle Britain's actual wealth be inflating the housing market. Keep in mind: the vast majority of Britain's gross wealth is housing: and the majority of that price is speculation. So once you take that away, you are left with very little (some fancy food companies - M&S-, BS artists in the City, and media wankers). There is little else there to call UK PLC.

Ian Abley
23 July 2008 at 18:59

Rex Burr has got the point, but he overestimates the costs. It is better than he calculates.

£800/m2 for a brick and block house of 100m2 is £80,000. £5,000 for utilities, £5,000 for fees, and £10,000 for a tenth of a hectare (large garden) is £100,000. The only thing stopping people doing this is fear of breaking the planning law.

But if lots of us built like Gypsies build - together by the hectare, or the tens of hectares - then we might stand a chance of keeping our homes against the buldozing planners.

Check out www.audacity.org

Fancy building an new town that breaks the planning law?