Michael Savage

Manager, Derivatives Credit Policy, Global Banking and Markets, Royal Bank of Scotland

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14.00 to 15.30 on Friday 18 May 2007

The causes and consequences of the house price boom, and what to do about it

Summary

Not enough houses are being built where they are needed, which distorts regional housing markets. But it does not explain the global boom in house prices, which has even affected regions with comparatively plentiful supply.

To understand the housing market, we need to understand the mortgage market - how did mortgages become so easily available and so cheap? Part of the reason is economic, part regulatory, and part technological.

Political imperatives have focused on the ideal of owner-occupation, particularly addressing the young professionals who are priced out of the housing market in many areas. The benefits of home ownership are clear - autonomy from capricious landlords, opportunity for windfall profits in a rising market and security of tenure.

But public policy has neglected the needs of tenants, reduced mobility and left individuals with a concentration of risk to rising interest rates and falling housing markets. The debate needs to move beyond the needs of home owners towards a focus on provision of housing.

The causes and consequences of the house price boom, and what to do about it

More to follow shortly...

What priorities do we want reflected in land use planning?

Has the notion of a distinct town and country become unsustainable?

Can planners reconcile government policies with where and how people actually want to live?

Is it justified to describe policies based on constraining building activity as "planning"?

Introduction

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