Britain's housing market will avoid a price bubble resulting from the government's latest "help to buy" scheme, because supply will catch up with demand, says the head of Travis Perkins, Britain's biggest building materials supplier.
"As long as there are people wanting to sell and move as well as buy and move then the market is helped to be in equilibrium," Travis Perkins' chief executive Geoff Cooper said.
He believes just over 100,000 new homes will be built in Britain this year, up about 20 per cent, while total housing transactions will be about one million.
"With that expansion of supply coming into the market, I think that's another important check on house prices running away with themselves," he said.
He noted Britain was coming from a low base in terms of housing activity, with the majority of people who buy a house not looking to buy a new house, but looking to buy an existing dwelling in a chain of housing transactions.
Some senior politicians, including business minister Vince Cable, and bankers such as Antonio Horta-Osorio, chief executive of Lloyds Banking Group, have expressed concerns that the government's "help to buy" mortgage guarantee scheme could inflate home prices.
But the Bank of England's deputy governor Charlie Bean said the government could raise the fees charged to mortgage lenders if "help to buy" pushed up house prices rather than increasing supply.
"It's a good thing that a degree of independence has been brought to bear on the 'help to buy' schemes by giving the regulatory authorities the power to adjust them if it looks like the housing market's getting out of control," Cooper said.
He predicted a situation where the housing market returned to health and the requirement for "help to buy" dropped, enabling the scheme's cap on properties at £600,000 (HK$7.5 million) to be reduced and refocused outside of London and on parts of the country where help was needed most.
Last week Travis Perkins, which also trades as Wickes, City Plumbing, Keyline, Tile Giant and BSS, posted an 8.6 per cent rise in third-quarter revenue, helped by an increase in construction activity, and said it was on track to meet analysts' profit forecasts for this year.
On Friday, Cooper forecast year-on-year volume growth for the building materials trade market for next year of between 2 per cent and 3 per cent and growth of between 1 per cent and 2 per cent for the do-it-yourself market.
With energy prices rising he saw a major opportunity for Travis Perkins to provide materials for more energy-efficient and environmentally higher performing buildings and said he was disappointed by prime minister David Cameron's proposal this week to cut "green" levies on energy bills.
"Long term I think it's going to be a great market. In the short term you are always going to have governments waxing and waning on what they can afford or what they think is politically expedient," he said.
In his role since 2005, Cooper will step down on January 1 and as a director on March 6. John Carter, the deputy chief executive, will take over.