Vince Cable sounds warning over ‘serious housing inflationary pressures’ as 77,000 people join industry in a year
A record number of people work in estate agents offices and the sector is growing so fast that it amounted to the fastest growing part of the national workforce in the three months ending in June, according to official figures published on Wednesday.
The Office for National Statistics said that 562,000 people are employed in real estate in the UK, the largest number since records began in 1978, with 77,000 joining the industry over the last year – data that added to fears that the country is heading for a house price bubble.
“We’re no longer a nation of shopkeepers – we’re becoming a nation of estate agents,” said Danny Gabay, director of economics consultancy Fathom. “I would certainly agree that the economy has turned a corner; my concern is about how sustainable this recovery will be, given that it is based on using government subsidies to encourage already over-extended households to take on even more debt to finance their consumption.”
Concerns about the state of the housing market were also voiced by the business secretary, Vince Cable, who called for an urgent rethink of George Osborne’s flagship Help to Buy scheme, which aims to provide government guarantees for low-deposit mortgages from next January.
The Lib Dem cabinet minister said there were signs of “serious housing inflationary pressures” developing in parts of the country. “We should certainly think about how [Help to Buy] should come into effect; indeed whether it should come into effect, in the light of changing market conditions. We don’t want a new housing bubble,” Cable told Sky News.
Shortly after, Downing Street was forced to insist the government will go ahead with the scheme, with the prime minister’s spokesman adding that many would-be home-owners are facing substantial obstacles because of caps on loan to value mortgages.
“It will be launched. We are faced with a situation – because of the fall in availability of 90% to 95% loan-to-value mortgages – where many first-time buyers are faced with a real obstacle to making a home of their own. It is important we address this issue,” the spokesman said.
Growing confidence in the outlook for the housing market has been a key component of the economic upturn that led Osborne, to claim in a speech on Monday that the UK is turning a corner. But the swelling army of estate agents led some commentators to warn that the recovery was too reliant on debt-fuelled growth. “If you wanted any clearer signal of the hollowness of the so-called economic recovery, you couldn’t make it up,” said Andrew Simms, a fellow of the New Economics Foundation thinktank.
Cable’s remarks also fuelled fears that the economic recovery could simply be based on a consumer boom and a housing bubble. He made his political reputation by criticising the Labour government’s economic boom for being based on a bubble and has often warned the recovery must be sustained.
Following pressure from the Treasury, the business secretary did, however, tone down a keynote speech, dropping a warning of the dangers of complacency over the economy. Addressing business leaders at a joint government/CBI industrial strategy conference in Warwick , he said “The point I am trying to make is that this is a long-term haul. We have got a marathon not a sprint here.”
Help to Buy was the centrepiece of Osborne’s March budget, but has drawn criticism from a broad range of groups, ranging from homelessness charity Shelter to the rightwing Adam Smith Institute, which fear it will simply drive up prices without boosting housing supply. The second, more controversial, leg of Help to Buy will offer taxpayer-backed guarantees on mortgages worth up to £600,000, for buyers with a deposit worth 20% or less of the price of their property.
Mark Clare, the chief executive of housebuilder Barratt Developments, said that the housing upturn is now spreading well beyond London and the south-east, as the company reported a 74% increase in pre-tax profits. “We are seeing some very, very strong interest on new sites that we’re launching around the country, even to the point where we’re starting to see queues … which is not something we have seen for many, many years,” he said.
Fears of a housing bubble have intensified since the Bank of England governor, Mark Carney, introduced the policy of forward guidance, under which the Bank’s monetary policy committee has sent a strong message that it expects to keep interest rates at their record low of 0.5% for at least the next three years.
News of the healthy demand for estate agents came as part of the ONS’s monthly snapshot of the labour market, which showed that the unemployment rate has fallen to 7.7%, in the first tentative step towards the 7% target that Carney says may signal an economy strong enough to withstand a rise in interest rates.
Unemployment on the International Labour Organisation measure tracked by the Bank stood at 2.49 million from May to July, down by 24,000 from three months earlier. That took the unemployment rate to 7.7%, from 7.8% over the previous three-month period, driven by a larger-than-expected 80,000 increase in employment.
On the more timely claimant count measure, which just includes people receiving out-of-work benefits, unemployment also fell, by 32,600 in August to 1.4m.
• This article was amended on Thursday 12 September 2013 to correct the name of the Barratt Developments chief executive to Mark Clare
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