UK Realtors ask Bank of England to Put a Brake on Bubbles

Below is an interesting report stating that in the United Kingdom, beneficiaries of the indirect asset transfer via zero bound rates have been appealing to authorities to put a dampener on an alleged housing bubble.

From the Financial Times (hat tip zero hedge) [bold mine]

Estate agents and surveyors have become so concerned about the dangers of another unsustainable housing boom that their trade body is urging the Bank of England to limit national house price growth to 5 per cent a year…

“The Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases,” said Joshua Miller, senior economist at Rics.

“This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”

The Rics intervention comes as data this week have reinforced a sense of recovery in the UK housing market and sparked warnings that a new bubble could be forming.

Average house prices hit another record high last month, according to figures published on Friday by the LSL/Acadametrics House Price Index, rising 3.2 per cent to £233,776 over the year to August.

It is important to point out how rare it is for beneficiaries of current policies admit to the risks of an inflating bubble. And that their call to contain bubbles signify as Posttraumatic stress disorder (PTSD) or stigma from the previous unpleasant experience expressed through the fear of another bubble bust.

As previously pointed out, a parallel universe exists in UK where asset prices continue to surge even as the economy struggles.

Asset booms in UK has led to a quasi-stagflation where statistical inflation rates have been higher than statistical economic growth rates whether annualized or by quarter.

Yet like in China or elsewhere, once the inflation genie has been let out of the proverbial lamp, hardly any regulatory caps have been successful in taming of bubbles. 

Besides bubbles have been convenient tools to generate statistical growth that embellishes the image of political authorities.

And proof of this is that despite BoE governor Mark Carney’s promise to keep interest rates low via “forward guidance” to supposedly bolster growth, which has rightly been met by skepticism by some of the Members of the Parliament (MP), yields of UK government bonds suggests that the halcyon days in the real estate and the stock markets appear to have been numbered—with or without the BoE’s action.

If the current trends of the bond markets persist, then eventually the bond vigilantes will force the hands of (global) central banks to officially hike interest rates which places all malinvestments forged via a regime of zero bound rates under intense pressure. 

By then, UK realtors will have their demands met, but sad to say that they are likely to endure anxiety relapse from another terrifying episode of a bubble bust.