Neil Harrison: Sensible mortgage repayment levels are key

Housing market activity has picked up in recent months. Picture: Ian Georgeson
Housing market activity has picked up in recent months. Picture: Ian Georgeson
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THE proposal put forward by the Royal Institution of Chartered Surveyors for the five per cent house price rise limit is one that has some challenges in it – many of which the report recognises – and is looking in the wrong place for the answer.

But before addressing the particular concerns with the proposal it is important to set the context.

The health of the property market should be measured via how many people are able to move home rather than average house prices. It is the volume of activity that matters.

As activity in the property market has picked up over the last few months there has been a rush to predict the next housing bubble.

However, national reports of rising home prices hide diversity at a regional and local level. In East Central Scotland we have seen the volume of activity pick up across all areas but prices have remained relatively stable across the area, with some local areas performing better than others.

The majority of buyers continue to be able to pick up their next home for less than the Home Report value.

At ESPC, we believe that the best way to avoid a property bubble consisting of unsustainable house price rises is by looking at the debt being taken on by the buyer rather than price they are paying. If there are changes to be implemented it is ensuring that anyone taking out a mortgage has really stress-tested their repayments for the day when interest rates do rise again.

Price caps are an over-complicated reaction and would not be welcome. RICS identified a number of risks with their proposal such as it being socially divisive, disproportionately favouring the wealthy and limiting supply. Unfortunately, the proposal discounts the impact of these risks too readily.

The last few years have taught us that tighter lending criteria will bring house prices under control. As long as careful and considered lending continues to result in homeowners having sensible mortgage repayment levels, house prices will take care of themselves.

• Neil Harrison is head of marketing at property firm ESPC