Is history repeating itself with Mark Carney?

While there’s no doubt that the Bank of England managed to grab one of the up-and-coming stars of the worldwide financial arena in Mark Carney, the emergence of a potential property bubble in London and similar issues in Canada prompt some very interesting questions. Mark Carney was in charge of the Bank of Canada prior to his appointment with the Bank of England and there are some very searching questions being asked over the pond by his counterparts.

The world of international finance is cut throat, actions taken today can impact for years to come and while it may seem a little unfair to suggest history is repeating itself with Mark Carney, there are certainly similarities.

Canadian property market

Despite the fact that the worldwide economy has struggled since 2008, the Canadian economy under the stewardship of Mark Carney seemed to escape the vast majority of major financial issues. This was one of the main reasons why the Bank of England decided to replace Sir Mervyn King with the first overseas governor the Bank of England has ever appointed. There are now major concerns of a house price bubble across many areas of Canada and indeed some experts believe it could take a decade before the situation is back under control.

Quote from PropertyForum.com : “Despite the fact that the Bank of England and various experts have been in denial with regards to the ever growing cost of property in London, the Ernst & Young Item Club has called for measures to rein in the impact which oversees buys are having in the capital.”

In many ways Mark Carney was in an impossible situation because he is now well and truly settled in the Bank of England and has no control over the Canadian situation. Maybe he would have acted quicker than the current Governor of the Bank of Canada if he had remained there or perhaps the situation was already set in stone before he departed?

London property market

The London property market has been one of the strongest in the world for some time now, despite the worldwide recession and issues with the UK economy. There has been talk of a house price bubble in and around London for a year or so and while Mark Carney and an array of other high-ranking officials have played down these issues, they seem to be re-emerging. The Ernst & Young Item Club has been the most vocal to date with a suggestion earlier this week that a London house price bubble was “emerging”.

It is difficult to lay the blame at any one particular door with regards to the London property market because this is heavily influence, perhaps to a degree no other market experiences, by overseas investors. The tax situation is different for overseas investors, London, has been seen as a safe haven for some time and maybe it was in the interests of politicians to fan the flames of the London property market to bring back the “good times”.

Conclusion

While it may be a little unfair to blame Mark Carney for the ongoing rise in Canadian property prices and a similar situation emerging in London, it is interesting to see these situations emerge effectively under the stewardship of one person. It will be interesting to see what action Mark Carney takes over the coming weeks and months to try and dampen enthusiasm for the London property market because this could be his greatest challenge yet in the world of international finance.