Treasury calms property fears

Ed Balls, the Treasury's chief economic adviser, has called for calm amid fears of a property market crash prompted by the governor of the Bank of Eng

12:19 16 June 2004

Ed Balls, the Treasury's chief economic adviser, has called for calm amid fears of a property market crash prompted by the governor of the Bank of England.

Mr Balls used a speech at a housing conference in Harrogate to offer a message of reassurance to the nation's homeowners.

The chancellor's chief aide said that no one could afford to be complacent about the housing market, and that developments were being closely tracked.

"The Treasury and the Bank of England are monitoring the current state of the housing market very carefully indeed," he said.

But Mr Balls said that there were strong arguments that the housing market boom did not threaten to undermine the overall stability of the economy.

He said that there were "good reasons" which justified a rise in the level of house prices in relation to people's incomes, "because prices reflect the balance between rising demand and restricted supply, and because greater confidence in economic policymaking has made people more comfortable with taking risks".

Mr Balls added that "unlike the 1980s", the present low relative level of interest rates also meant that "household interest payments remain low by historical standards".