Mortgage limits should be imposed on British homebuyers, the Bank of England to prevent the housing prices are rising at least in the next five years, well-known leftist analytical center says.
As a step aimed at end Britain’s reliance on property investments for the economy, Institute for public policy research (IPPR) stated that the Central Bank should be given new powers to the goal of zero price index inflation similarly is aimed at maintaining the overall inflation at around 2%.
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New goal zero inflation will mean that housing prices fall by about 10% in real terms, and salaries continue to rise, a think tank, said that making homes more affordable.
Call IPPR comes as part of a wider plan to rebalance the UK economy away from traditional dependence on the city and investment real estate to science and production, Theresa may promised when she became Prime Minister in 2016.
Housing prices continued to rise last year, despite a sharp increase in the tax on buy-to-let and second homes, the quarter and month of uncertainty and weak economic growth. Figures from building society nationwide showed that prices rose at the lowest pace in five years in June, London is still a weak point, but still managed to rise by 1.9%.
Housing prices increased tenfold between 1980 and 2008, pushing the average price of a home in the UK up to £215,444, almost eight times the average income.
The discussion paper, in a time of: Finance and the UK current account deficit, calls on the Committee of the Bank of England’s financial policy with the support of the Treasury, to insist on higher down payment and stricter ceilings on the loan relative to income. The increase in home construction also reduces average prices, IPPR said.
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Grace Blakely, IPPR research fellow and the author of the discussion paper stated that the government needs to wean the UK from property speculation and debt as a stimulus for GDP growth.
She said, “since the 1980-ies, the business model of the UK kept on attracting capital from the rest of the world, which are sent to consumer debts UK. The 2008 crisis proved that this is unacceptable. We need to move towards a more sustainable model of growth built on production and investment, not debt and speculation.
“We have to break the cycle of constantly rising housing prices driving property speculation, the displacement of investment in the real sector of the economy.”