The call by the RICS for house price inflation to be capped at 5% annually by official measures has met with widespread condemnation in the property industry.
Paul Smith, CEO of Spicerhaart, said: “This is the RICS seeking headlines rather than real solutions. A market sets its own level and to manipulate it means playing with fire. Imagine if there was a call to cap the stock market.”
Nicholas Finn, London director of property finders Garrington, said the proposal would disadvantage mortgage buyers while giving cash buyers an extra edge.
He said: “Cash buyers, who remain unaffected by the proposal, make up around 40% of the market.
“They are already ahead and advantaged, and buyers with mortgages do not drive the market when there is a small pool of properties. We were recently involved in a case where a seller had a number of sealed bids, and our client had to convert to a cash buyer to be in the running as cash buyers are considered quicker buyers.
“Capping mortgage buyers will further alienate them from a competitive London market.”
Nicholas Leeming, incoming chairman of Jackson-Stops & Staff, warned that restrictions could be detrimental to the market in parts of the country still waiting to experience the ‘froth’ highlighted by RICS.
He said: “While there are some signs of greater activity in the UK housing market, this is not reflected across all sectors.
“We do not believe that there is any set formula to be followed in controlling the housing cycle, but the Bank of England will obviously consider whether higher interest rates, restricting credit availability or other controls are required if there is clear evidence that the overall market is overheating in the future.”
One critic, Stuart Law of property investment firm Assetz, said the RICS’s proposal was an outrageous idea – and called for more farmland and Green Belt sites to be made available for house building.
He said: “No one wants to see house prices rising at outlandish levels, but artificial price controls always end in tears and are not the way to approach this issue. A cap on property price increases would lead to a corresponding cap in developers building homes.
“However, the best way to temper rising prices is by building more homes and placing a temporary block on NIMBYism.
“A useful mechanism would be to compel local authorities to pre-zone and compulsory-purchase greenfield and Green Belt land which is then automatically released for building homes in areas where property prices are exceeding, say, 5% annual increases.
“Farmland is cheap and if accompanied by substantial Section 106 affordable housing requirements would improve supply and help reduce price growth. This is an extension of the recent positive step to force local authorities to identify brownfield land which could receive planning quickly and efficiently.
“The RICS is effectively asking for market prices to be manipulated, and thereby falsify the property market. This is outrageous and a poor economic solution to a simple supply demand problem. Let’s build more.”