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Bergason Property Services Limited - News- Talk Of A Housing Bubble Is

Talk Of A Housing Bubble Is `Hysteria`, Says Think Tank

Date Added 09/10/2013

Fears of a housing market bubble stoked by the Help to Buy scheme are pure `hysteria`, says a leading think-tank.

The stance taken by economic group the EY Item Club is, howevr, sharply at odds with Lloys which this morning warned of a dangerous bubble in house prices unless steps are taken to lift the supply of new homes.

Meanwhile RBS revealed that as soon as the Help to Buy mortgage indemnity scheme went live, demand shot up: RBS reported booking 5,000 mortgage appointments within the first three hours.

Item has shrugged off housing market speculation, but is forecasting that the economy will grow by 1.4% this year, 2.4% next and 2.6% in 2015.

It says the economy will be helped by the housing market recovery, which will boost spending on household items and professional services such as conveyancing, and drive GDP growth.

The group, formerly the Ernst & Young Item Club, believes that the housing market will enjoy a bounce, rather than undergo a boom.

`Buy-to-let and other cash-rich buyers have had the market to themselves until this year, but Help to Buy will help level the playing field for first-time buyers and low-equity households,` Item said.

It predicts there will be over one million housing transactions this year, with house prices up 3.5% on last year. It forecasts house prices to rise 6.5% in 2014.

The group does not believe the Help to Buy mortgage scheme will fuel a housing bubble. Instead, it calls it `well-timed and targeted`.

Peter Spencer, chief economic adviser to the group, said: `Despite recent criticism of these initiatives, the chances of seeing another housing market bubble are extremely slim.

`House prices and transactions are only just recovering from the credit crunch and will be paltry in comparison to those of a decade ago.`
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