This years annual budget introduced a "Help to Buy" and a "Funding for Lending" scheme, both aiming to help more people get onto the property ladder. Recent Statistics show that House prices have risen at a rate not seen since June 2010. This all points to signs that the economy is beginning to pick up. The increase in house price indirectly affect economics growth by strengthening home owners confidence (wealth effect) meaning that their marginal propensity to consume also increases. This increased consumption is pumping money back into firms allowing them to expand and increase the economies productive capacity in the long run. The derived demand from the boom in the housing market, will all contribute to economics growth by providing more jobs.
However, many Economists are worried about this "housing bubble," as a similar boom between 1997-2007 led to the Economics Crisis we ultimately find ourselves in today. The "Help To Buy " allows people to buy a property with as little as a 5% deposit. The encouragement by government to banks to increase lending has clearly been having an affect, although is this "Credit " mentality not what got us into this mess in the first place ? But Bank Chiefs have backed the scheme and have dismissed claims that It will lead to a "housing bubble" as it is only temporary , and housing prices are still well below their peak in 2006.
In addition to this problem, the increased demand for houses has been met with a lack of supply. Their has been a shortage of newly built affordable housing , and thus this is lagging behind. Building firms are awaiting stability within the housing market before massively increasing the volume of new housing , as they fear not being able to sell them.
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