Lord Heseltine: former deputy prime minister, holder of the freedom of the city of Liverpool, owner of MT parent company Haymarket. It’s safe to say he’s seen a few bubbles in his time – and now he’s warned that unless the Bank of England does something, property is going to become another.
On yesterday’s episode of Radio 4's The World at One, Heseltine warned allowing people to borrow amounts to rival the GDP of smallish countries will create a ‘dangerous situation’.
‘It was part of the initial housing bubble crisis when one saw the ratios begin to creep up and up,’ he said. ‘If you take into account the inevitable increase in interest rates that is going to come some time in the medium, if not early, future then that is a dangerous situation.’
The solution? Cap loan-to-salary ratios. ‘Certainly [the Bank of England] should look at [a cap]. They should look at anything that can try to help even out the rebalancing of the economy, as long as it does not frustrate the rebalancing itself,’ he said.
That isn’t great news for George Osborne and his much-maligned Help to Buy scheme, which has its first birthday tomorrow. The scheme, under which people (not just first time buyers) can borrow 95% mortgages, guaranteed by the government, of up to £600,000, has been blamed for inflating property prices.
Although to be fair, when property is a global market, limiting the amount Brits can borrow might just have the reverse effect – particularly in London, where there’s a ready market of cash-rich foreigners who see property in the capital as a ‘safe haven’ in which to put their money.
To wit: a survey out this morning by property research company Dataloft, looking at billionaires’ buying habits. Apparently the average billionaire is married, worth £1.79bn and owns property worth £50m or more, with an average of four homes. That typically includes a home in London worth £22.3m (a studio flat in Dagenham, by current property prices); a holiday home on the French Riviera worth £18.6m, a place in Tuscany worth £12.1m and another home somewhere more interesting.
There are more than 2,170 billionaires in the world, with a combined net worth of £3.88tn. 60% are self-made, 20% had inherited wealth and the rest were somewhere in between. 67 of them live in London, while Paris has 25 and Geneva a mere 18.
The best bit is the assertion that a billionaire would ‘never spend less than £10m on a London property (unless it is for a servant)’. Which just goes to show exactly what buyers are up against…
- Heseltine will appear at MT Live in June. Book your tickets here.