Changes to the housing market driven by the COVID-19 pandemic might make for a very different picture compared with previous years, according to Jon Cunliffe, a deputy governor at the BoE
Britain’s pandemic-driven housing market boom is likely to cool when tax incentives are withdrawn but more persistent drivers of demand might keep pressure on the market, a Bank of England policymaker said on Thursday.
House prices increased in the 12 months to March by more than 10% in annual terms, the biggest rise since August 2007, spurred by demand for bigger homes as more people work from home, as well as the government’s support measures, data showed.
There may also be some reasons to believe that the recent increase in demand for housing, and perhaps the composition of that demand reflects some more persistent drivers, and that the market will not fall back to its pre-pandemic decade performance when the tax incentives have gone, Jon Cunliffe, a deputy governor at the BoE, said in a speech to the Law Society.
Cunliffe said past examples of temporary cuts to property purchase taxes – known in Britain as stamp duty holidays – had resulted in a cooling in the housing market upon their expiry.
But changes to the housing market driven by the COVID-19 pandemic might make for a very different picture compared with previous years, he said.
If a housing boom emerged, measures by the BoE’s Financial Policy Committee (FPC) would lean against it, Cunliffe said.
If the self-reinforcing dynamics of past periods began to re-emerge – strong demand, fast growth of prices relative to incomes, easy credit conditions and high levels of transactions – the FPC’s measures would certainly begin to have a stronger impact in constraining the increase in aggregate mortgage indebtedness, he said.
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