Threadneedle’s Burgess: Housing efforts won’t help UK over long term

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Threadneedle Investments chief investment officer Mark Burgess is concerned that the UK housing market’s recent strength is not sustainable.

Burgess, who does recognise the positive growth in sector, fails to see the long-term benefits created by efforts to shore up the sector.

The UK housing market has been showing signs of strengthening, with the Right Move’s House Price Index showing a 5.5 per cent climb in house prices since 2012. The Government, meanwhile, has implemented schemes such as Help to Buy to maintain demand for homes.

However, Burgess says: “It does not benefit society. I might be happy that the value of my house may have risen since I bought it, but it does not help my children when they come to the property market.”

Burgess’s comments come as Bank of England Governor Mark Carney said he is “fully prepared to deploy” new restrictions and requirements if there is a risk of a bubble developing in the UK housing market.

“The Chancellor has introduced a number of measures to support home ownership. That may be one of the things they need to do but they need to be doing a lot of other things,” Threadneedle’s CIO says.

“There has been quite a lot of focus on supporting the housing market which I suspect is probably not in the long-term interests of the economy.”

Following the launch of the Government’s ‘Help to Buy’ scheme, Communities Secretary Eric Pickles said the UK housing market had “turned a corner” earlier in August.

However, RD Signature’s Daniel Williamson sees government intervention with the housing market as a mixed blessing, with the Help to Buy scheme’s necessity being debateable. 

Williamson, who is the firm’s head of Bristrol discretionary, says: “The dilemma of course is that with the central bank still aiming to keep interest rates low the chances of a bubble increase. At this point, given the extremely low mortgage rates, house affordability is certainly not stretched and as such, talk of a bubble would seem misplaced.

”The key will be that politicians and central bankers monitor developments extremely closely, as the last thing that the country needs is a return to the debt fuelled speculation that helped to cause the last crisis.”