Property market transactions reach six year high

The number of homes changing hands across Britain is now at it’s highest level since 2008 according to the Royal institute of Chartered Surveyors. As the property market goes from strength to strength. The only thing that appears to be holding the market back seems to be the lack of availability of homes.

This is having the effect of increasing house prices to levels that are considered to be unsustainable. These comments come as the housebuilder Bovis Homes said on Thursday that the number of new homes being completed had risen and they had also seen a big rise is forward sales. Bovis also said that it’s average house price was up 14% for the year and that is profits would show a considerable profit for 2013.

According to the Bank Of England Governor Mark Carney, any potential bubble in the housing market can be managed with the tools at it’s disposal. The bank will be keen not to punish the whole of Britain for the runaway market in London by raising interest rates. It is debatable whether a rise in interest rates would have any impact on the London market because most transactions are by cash buyers and an interest rate rise would not affect them.

In his recent appearance with the Lords Economic Affairs Committee he said that the economy had improved beyond the expectations of the bank but that they were keeping a watchful eye on the property market and would take action if necessary. He went on to say that he was still concerned with the personal levels of debt across the UK were so high and that this could hinder the economic recovery.

Mark Carney has been criticised by some experts over his forward guidance policy where he said that the Bank Of England base rate would not go up until the UK employment rate fell to 7%. In defence of this policy he went on to say that having met more than 300 UK businesses he was convinced that people understood the policy well and that it had made make financial decisions easier for businesses because they could borrow money knowing that there was little chance of rates increasing until the unemployment levels dropped to 7%.

This has given businesses the much needed confidence to invest money without worrying about interest rates rises. The bank now has the power to change mortgage lending rules to prevent the housing market getting out of control. It is much better for the UK economy to restrict mortgage lending rather than increasing interest rates as this affect everybody including businesses. When interest rates are increased everybody is affected as opposed to targeting lending criteria.