A leading Bank of England policymaker has called on the Government to raise taxes to prevent housing booms in the future.
Adam Posen, an independent member of the Bank's Monetary Policy Committee, said in a speech yesterday that the authorities should seek to limit house price bubbles because of the damage they inflict on the rest of the economy when they burst. He also suggested that property speculators and second home owners be subject to additional restraints.
Adam Posen, an American economist who joined the MPC this year, said: "Real estate bubbles tend to have much higher real economic costs than equity bubbles, perhaps because they involve illiquid collateral and local spillover effects."
Mr Posen suggested that real estate taxes, which include stamp duty and capital gains on properties apart from a main residential home, could be used as "automatic stabilisers" – rising during a boom but falling in a slump.
