Even as the economy sinks, the property market keeps surging. It sounds like good news, but is more likely a disaster in the making
Up, up and away! The rest of the economy is rapidly heading south, yet the property market keeps on rising. House prices hit a record high last month, according to Nationwide building society, and are increasing at the fastest rate since 2004. The news is striking, but it fits with reports of a “frenzy” in the market, where homes are selling at their asking price or more, and inner-city households are moving out to the suburbs and the countryside in search of gardens and home-office space. Back in July, the Bank of England’s chief economist, Andy Haldane, promised a V-shaped recovery. Two months later, that forecast has failed to apply to almost every sector – apart from asset markets.
Some of this is a rebound in activity after lockdown, when property viewings and transactions came to a halt. But estate agents and chartered surveyors can also thank Rishi Sunak for his suspension of stamp duty on properties worth less than £500,000. Most of all, they owe the Bank a debt of gratitude for flooding markets with ultra-cheap money in response to the pandemic. Indeed, the state’s response to Covid-19 resembles, in some key aspects, its reaction to the banking crash of 2008. Ministers explicitly try to prop up the property market, while central bankers pump markets with money, much of which goes not into productive investment that might create jobs, but into speculative purchases of houses, artworks and shares.