Talk to spokesmen from Number 10 and they are unequivocal—there is no housing bubble. Not in London, not in the south east, not in Britain over all, none. All talk of a bubble overlooks the fact, they say, that houses are still below their long-term peak values. Furthermore, the Bank of England’s Financial Policy Committee is specifically instructed to look out for any signs of bubbles and as yet it has not blown a warning note on the housing hooter.
In this reading, there is no cause for concern—no cause, either, to question the government’s Help to Buy scheme, by which the Treasury will help first time buyers of properties below £600,000 with their deposits.
There is also a certain reticence on the part of Number 10 to give any sense of why they are so confident that there is no bubble. The recent Nobel Prize-winning economist Robert Shiller—the only living person to have a financial index named after himself—told Newsnight that the UK housing market: “looks somewhat like a bubble, prices are going up pretty fast. Whenever you have easy credit, that helps promote a bubble.”