Inflation - The devil lying in wait?
Justin Sumner gives his monthly update on how changes in the wider economy could impact on the housing market
Whilst the Bank of England maintains its stance towards injecting cash into the economy there lies in wait the risk of inflation creeping in.
At the moment there is deemed to be a lot of spare capacity in manufacturing and should they be encouraged to buy up resources, so as to take advantage of cheap borrowing and a weak pound, then this could so easily create asset price inflation.
“Large regeneration sites remain a cause for concern for their developer owners and the banks alike.”
It is known already that VAT is due to rise again. Some say this might be used as a tool by the government as a money raising initiative. This might mean VAT rising above the original rate of 17.5 per cent to possibly 20 per cent, but we hasten to add the jury is still very much out on this happening.
Consumer price inflation is at least on track at 2 per cent over the medium term. However, looking further ahead still, the devil of inflation lies in wait. The trick for the Bank of England is to manage the economy around this obstacle, and now over or through it.
The good news is that we do seem to be emerging from a recessionary period and the trick is to now slay the devil of inflation, so as to keep up or speed momentum in the economy.
House builders are emerging from the recessionary gloom but undertaking relatively small easy to finance projects. For the moment, large regeneration sites remain a cause for concern for their developer owners and the banks alike. New funding models must and have to be found to get these projects moving forward. Talk is circulating that by turning to the private rented sector developers might be able to fund such schemes via the securitisation of future rental incomes.
This may not affect viability models directly but if such housing could be considered as part of section 106 agreements, in the short term at least, then this might be the catalyst for such schemes coming forward. We await to see how such theory is implemented via the planning process.
Justin Sumner is director - new homes at consultancy GL Hearn
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Readers' comments (1)
para char | 14/12/2009 11:37 am
Can indide housing do any better????? What about an infastructure banks and the new logic which shuch a vehicle!! We need a new deabte so lets see what david Orr, or jackie sadek can offer. it is a matter of tme before every brick is sold to Pay for mr brwons IOU
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