The Bank of England is to be given sweeping new powers to prevent house prices spiralling out of control, amid predictions that a year of stable house prices in 2013 will spark a resurgence in homebuying.
The Royal Institution of Chartered Surveyors (Rics) predicts the number of house sales will jump amid a resurgence in confidence that prices will stabilise and believes they may even start to move up towards the end of the year. The organisation made its predictions as the Bank of England provided details about how it would use new powers to burst burgeoning economic bubbles by forcing banks to hold more capital.
The Bank’s new financial policy committee (FPC) is getting specific powers which that it could use to force banks to hold more capital against mortgages with high loan-to-value ratios, or a high loan-to-income ratio.
This, consequently, could subdue mortgage lending and limit house price rises. In addition to this so-called sectoral capital requirement, the FPC will be able to force banks to build up capital during boom years, through what are known as countercyclical buffers.
While the housing market is moribund, Rics said that more homebuyers would emerge in 2013 than last year due to the stabilising UK economy and a lack of sovereign bankruptcies in the eurozone.
Last month, 24% more surveyors across the country predicted transactions to rise rather than fall over the next quarter, said Rics.
The number of homes coming up for sale remained relatively stable last month, while demand from would-be buyers saw a continued increase, according to the Rics survey. A north-south divide will persist in 2013 as London once again bucked the overall trend and saw significant price rises last month.
The north-east and Wales saw the biggest drops. Notably, prices levelled out in the West Midlands last month. This represents the first time in more than two and a half years that prices have stopped falling.
Peter Bolton King, Rics’ global residential director, said: “As we start the new year, confidence in the housing market does appear to be improving … it may be that we are now over the very worst.”
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