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Public misunderstand causes of high house prices

Friday, 5 October 2007 12:00 AM

There is widespread misunderstanding of the current high property prices among UK homebuyers, according to research released today by PropertyFinder.com.

Stable low interest rates and inflation have been the main economic motivators for high prices, but the public have a range of scapegoats when attributing responsibility.

Demand from property investors was blamed by 16.1 per cent of those questioned, whereas 14.7 per cent thought migrants were to blame.

Mortgage lenders offering higher income multiples for loans were responsible according to 14.6 per cent of homebuyers and 14 per cent blamed estate agents for over-valuing houses.

As many as 12.6 per cent blamed the government for not increasing supply, 7.9 per cent blamed the British obsession with homeownership and seven per cent blamed family breakdown for forcing up prices.

"Ten years of low interest rates have brought about Britain's high house prices, but this is poorly understood by most people," commented PropertyFinder chief executive, Warren Bright.

"Restrictive planning policy enthusiastically enforced by local councils has severely constrained the ability of developers to provide the number of homes needed by Britain's rising number of households, and has exacerbated the rise in property values.

"Immigrants and property investors make high profile scapegoats but are simply too small in number to be responsible.

"The drift to the south by the UK's own population has pushed prices up faster there than elsewhere in the country, but that is nothing to do with immigrants and does not affect overall national average prices.

"In any case, the house price boom predates the recent big wave of immigrants."

In response 91 per cent thought the government should take action to address the situation - with a mere nine per cent stating the government should not interfere.

Worryingly, 20.5 per cent those questioned thought limits on migration were the best method of lowering house prices.

As many as 15.1 per cent of investors believe taxing property investors would ease the situation, along with 14.3 per cent who wanted to see restrictions on multiples of mortgage lending.

A mere 10.7 per cent of those questioned said encouraging local councils to build more homes would solve the problem.

However, this was the most likely cause of action to improve the situation according to PropertyFinder.

"The strength of appetite for government interference is quite startling.

"And the proposed remedies are pretty extraordinary. Immigration controls are not going to make any significant difference to house prices," concluded Mr Bright.

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