PFS 2014: There is no house price bubble
Speaking at the ICC in Birmingham at the Personal Finance Society National Conference, he said the market has seen yearly price growth of 2.5% after inflation since the 1950s.
Since that time house prices have increased by 3.8 times after inflation, which is in line with a number of other assets.
He said: “We are currently 5% below trend in the UK so from that perspective there is nothing to justify anything that we would call a housing bubble.”
According to Bailey the UK property hasn’t seen “huge demand” over the last few years, calling it an “initial burst” after several years of prices falling or staying flat.
But he added that London is a “special case” as house prices stand 10.6% above the long-term trend in the capital.
Going forward he said the lack of housing supply “is the biggest problem we have in the UK”, especially with the rise of single parents, students and increased migration which has increased the demand for homes.
According to Bailey the UK will build 138,000 new homes this year, roughly the same number as in the 1920s.
He said: “There simply isn’t the political will to go on any major housebuilding program that will address the fundamental problems of the economy.”