Home Residential Property “Chances of housing bubble extremely slim,” says EY

“Chances of housing bubble extremely slim,” says EY

by Deleted Subscriber Content
14th Oct 13 9:35 am

The government’s Help to Buy mortgage scheme will quickly improve the housing market, and we are very unlikely to see another housing market bubble, according to a new report from EY ITEM Club forecast (EY was formerly Ernst & Young).

Investment in new housing projects will grow by 7.5% next year and by a further 10% in 2015, according to the quarterly report.

EY is positive about the government’s controversial Help to Buy scheme, calling it “well-timed and targeted” and likely to benefit much of England. (Read all the latest news on Help to Buy and find out how Help to Buy works.)

Critics say that Help to Buy will create a major surge in demand for housing as it opens up house-buying to rafts of new buyers, creating more demand without resolving the issue of supply. They warn that it therefore risks a property bubble.

The EY report is forecasting that house prices will grow 3.5% this year, then 6.6% in 2014, but says that “fears of a housing bubble are unfounded and premature at best”.

Peter Spencer, chief economic advisor to the EY ITEM Club, says: “The government’s efforts to revive the mortgage market have been well-timed and targeted, and will benefit most regions in England.

“Despite the 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.

“Household finances are also in much better shape, with debt to income ratios now at sustainable levels.”

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