BOE’s Dale Says Property Pickup Is Good for U.K. EconomyJennifer Ryan and Scott Hamilton
Britain’s property-market rebound is benefiting the economic recovery and doesn’t yet pose a risk, said Bank of England Chief Economist Spencer Dale.
“I think a healthy housing market is good for the U.K. economy,” he said in an Bloomberg News interview in London yesterday. “What we’ve seen in the housing market is one which has moved from dormant to one which is functioning more like a normal market, which I think has been good for our recovery.”
Demand for property has surged in the past year, and reports from lenders, the government and the BOE have shown a revival in prices, sales and mortgage lending. While the pace of growth has fueled concern that a house-price bubble is forming, Dale said the increase hasn’t got to unsustainable levels as transactions are still “well below” normal.
“Any of us who have lived through any sort of economic history will know you can go from a healthy housing market to an overheating housing market very quickly, and so our job is to worry about those types of things and be alert to it,” he said. “We’re fully alert to that risk and we’re worrying about it. But I don’t think those risks are materializing at the moment.”
Rightmove Plc said this month that asking prices for homes rose 6.9 percent in February from a year earlier, the best annual performance since 2007. In London, prices surged 11.2 percent. The EY Item Club has said that the capital’s housing market is beginning to show “bubble-like conditions.”
Gross mortgage lending rose 33 percent in January from a year earlier, according to the Council of Mortgage Lenders. It also said monthly approvals for house purchase averaged 70,000 in the fourth quarter, the strongest rate for six years.
Dale said the pickup in transactions will support demand by spurring house building and construction, as well as purchases to furnish homes such as white goods. The economy grew 1.8 percent in 2013, the fastest since 2007.
With the formation of the bank’s Financial Policy Committee, in operation since April last year, Dale said the Monetary Policy Committee is free to leave the key interest rate at a record-low 0.5 percent for longer while the new panel deploys macroprudential tools to tackle risks to financial stability.
If housing overheats, “the onus on us to do something about it is less now,” he said. “Quite rightly the initial onus would be on the FPC. They’re the first line of defense.”
His comments echo those of policy maker David Miles, who said Feb. 17 in a Bloomberg interview that the BOE is a “long way” from using the “big stick” of an interest-rate increase to tackle excesses in the property market.