“Economic recovery is made in the housing sector, but it could all come crashing down with too much regulation.” This was the key message by Professor Patrick Minford of Cardiff Business School to over 100 delegates at Bruton Knowles’ annual Cardiff Property Dinner this week.
Held at the Royal Welsh College of Music & Drama, attendees from across the property sector in Wales including house builders, commercial developers, law firms, banks and housing associations heard from Professor Minford how we need to learn from past financial crises to avoid making the same mistakes again.
Key points made were as follows:
- We’re not about to fall off the cliff and this isn’t a bubble – this is an economic lift-off for the UK. Wales is smack on the UK average for almost everything, so the signs are encouraging.
- The recent crisis wasn’t caused by ‘evil bankers’ – it was ultimately down to the longer term effects of the shortage of commodities driving up prices. We’re coming out of it more by luck than good policy.
- One of the reasons for the recovery taking so long to take hold has been the regulation introduced to prevent future crises. There is simply too much and the timing was wrong, meaning that it has stifled, and continues to stifle, the supply of credit.
- Credit is now starting to flow back in to property and we’re seeing the results in terms of the buoyant housing market. But those wanting to immediately temper this growth should slow down - in overall terms the market is simply returning to the long term 3% real growth trend which has been in place since the 70’s.
- The answer isn’t simply widespread bank regulation – any regulation needs to take into account bank size, with potential for SME credit and smaller banks to be exempt. Regulation needs to be weakened or eliminated altogether for SMEs – they’re typically the ones who get the economy going again after a financial crisis.
- To further encourage the property sector, the current planning system needs to be ripped up as it is distorting supply and demand and, hence, influencing prices. We need to focus on improving infrastructure and moving away from the concept of untouchable green belt land.
According to Mike Rees, Partner at Bruton Knowles in Cardiff: “It’s encouraging to hear Professor Minford claim that Wales, and Cardiff, are following the UK average in terms of recovery. However, the fear remains that the City’s growth is being stifled by continuing delays in the local plan. These delays could be added to by the proposed merger of Local Authorities, as outlined in the recent Williams Commission report, and the Silk Commission’s recommendation that stamp duty be devolved to Wales without certainty about the outcome.”
Anthony Turner, Partner and Team Leader of the Cardiff office said: “On behalf of Bruton Knowles, we’d like to thank Professor Minford for delivering such an insightful and thought provoking speech. We were delighted that so many people could join us in discussing the current issues affecting Wales and there’s no doubt that this was our most successful Cardiff Property Dinner to date.”