Haldane Says U.K. Housing Market ‘On Fire’ and Feeds Inequality
(Bloomberg) -- Bank of England Chief Economist Andy Haldane said the U.K. housing market is “on fire” and contributing to a growing wealth gap -- but there’s little that the central bank can do to fix structural issues.
“As things stand, the housing market in the U.K. is on fire,” Haldane said at an event about inequality on Tuesday. “There’s a significant imbalance between incipient demand and available supply of houses, and because the laws of economic gravity have not been suspended, the result is pretty punchy rises in house prices.”
The remarks underscore concerns about the impact that rising property prices are having on the ability of younger people and those on moderate wages to own their own home. It marks the third member of the bank’s nine-member policy panel to warn about housing since Nationwide Building Society recorded double-digit price growth for the first since since 2014.
Haldane said the key things powering the increase aren’t something central banks have the power to change.
Without “doing something of a longstanding nature with the supply side of the U.K. housing market,” Haldane said, “inevitably we’ll see the sort of relentless rise in house prices relative to incomes that we’ve seen over the past 30 to 40 years.”
He also said:
- Inequality has been growing worldwide over the past decade after the global financial crisis slowed growth and dried up opportunities for those on lower pay
- Those inequalities are large and growing in many places because of Covid-19
- How inequality evolves from here also depends on how quickly demand bounces back in the economy, and that the “early signs” are “encouraging” with rising vacancies and falling unemployment
“For most people the global financial crisis came like an earthquake exposing those structural fault lines in our societies, of which inequality is among the largest,” Haldane said.
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