Barclays Chief Warns Of Property Boom In UK

Barclays Chief Warns Of Property Boom In UK

Barclays PLC (NYSE:BCS) (LON:BARC) Chief Executive Officer Antony Jenkins warns increasing house prices could pose a risk of a property-driven boom.

Barclays Chief Warns Of Property Boom In UK

Speaking at a Barclays PLC (NYSE:BCS) (LON:BARC) conference in New York on Tuesday, he remarked: “We are seeing probably a more buoyant housing market for the first time in perhaps as much as a decade. That’s a bit concerning because there is the risk of a property-driven boom in the U.K. The regulators are on it and don’t intend to let it happen, but these things can be difficult to control.”

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House-price gauge rose highest in seven years

According to the Royal Institution of Chartered Surveyors, the U.K. house-price gauge rose to its highest in almost seven years in August amid economic recovery gathering pace besides government’s steps to boost mortgage demand.

Help-to-buy plan

The U.K. government announced a ‘Help-to-Buy’ plan to provide interest-free loans to buyers of newly built properties. The program will give banks guarantees on mortgages for purchasers of both new and existing homes. The policy will allow people to buy a house with a deposit as little 5 percent of the value of the property.

Chancellor of the Exchequer George Osborne this week defended his plan amid criticism that the plan might be fueling a housing bubble. He defended the plan by saying it is needed to help the market.

29 percent rise in sales in 10 weeks

Barratt Developments, one of Britain’s biggest house builders feels the government’s props for the housing market, including the Budget’s Help-to-Buy initiatives, have helped drive a 29 percent increase in sales in the past 10 weeks alone. However, its chief executive Mark Clare warned of the slow pace of house building.

Recently Barratt reported a 74 percent jump in its pre-tax profits to £192.3 million in the year to June, thanks to improved confidence and better lending conditions. Bank of England’s Funding for Lending also facilitated the housing recovery spreading beyond London and the South-East.

The U.K. government and Bank of England have made it a priority to increase bank lending. Last year, the two decided to offer cheap finances if banks lend more to help revive the sluggish economy. In April, the government extended the Funding for Lending Scheme to 2015, and encouraged banks to lend more to small businesses.

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