The debate over the Coalition’s efforts to kick-start the housing market intensified today as Barclays chief executive Antony Jenkins warned of a “property-driven boom” in the UK.
His comments came as Business Secretary Vince Cable cautioned against complacency on the state of the nation’s nascent economic recovery, saying: “There are risks, not least the housing market getting out of control.”
One of Britain’s biggest housebuilders, Barratt Developments, also underlined the impact of a clutch of Government props for the market including the Budget’s Help to Buy initiative, which has helped drive a 29% rise in sales in the last 10 weeks alone — but also drew fresh warnings from chief executive Mark Clare over the slow pace of house building.
Jenkins, speaking at a conference in New York, said: “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 UK. The regulators are on it and don’t intend to let it happen but these things can be difficult to control.”
The Barclays chief added that “the sorts of things you’d expect to fuel economic growth in the UK still seem to me to be quite weak”.
Clare, who unveiled a 74 per cent rise in Barratt’s pre-tax profits to £192.3 million in the year to June, cited improving confidence and better lending conditions thanks to other initiatives such as the Bank of England’s Funding for Lending scheme as the housing recovery spreads beyond London and the South-East. He admitted: “We are all a little surprised by the speed of the recovery”.
Asked whether Jenkins had a point, he said: “I don’t think he has. Transactions are still 40% down on the peak and average house prices still 10%-15% down even before inflation. We are building half the number of houses we need in this country. Affordability will continue to be a cap on wages. People out there are still challenged.”
London, where Barratt saw sales rates jump by more than a third last year, remains a “very, very different market” according to Clare.
Prices on average are close to £300,000 but it sold the penthouse in its Courthouse development in Westminster for £3 million. The firm spent £1 billion on new land last year, and rival Redrow today increased its financial headroom for further land buying by £50 million.
Saudi businessman Mohammed bin Issa al Jaber is taking legal action against a US legal firm, White & Case, which he claims could see him sue Barclays for up to $10 billion (£6.4 billion). He has demanded that lawyers hand over documents relating to a 10-year-old “confidential” settlement between the bank and two Saudi Arabian ministries, which he claims damaged his business.