When this spread is high, it’s telling you that, unless you think rental prices are going to weaken, it’s prospectively cheaper to buy a house than rent one. You might in that environment expect the purchase price of housing to grow faster than usual. The blue line, which is average growth in house prices over the following five years, shows that this is what has tended to happen. For example, the house price boom in the early years of the millennium was preceded by a steep fall in longer-term real interest rates (driven, I would suggest, by a decline in the neutral rate of interest), through the second half of the 90s. That raised significantly the spread between rental yields and those on indexed government debt – when the spread was at its widest, in 1995, the gap between the two was 10% points. But that boom in house prices, in its turn, depressed rental yields significantly – to such an extent the spread over gilt yields fell to less than 4% points. Relative to gilts, houses were as expensive as they had been in the late 1980s. Even without the intervention of the financial crisis you might have expected much weaker growth of purchase prices over the following few years, and that’s what happened. However, we should be careful not to extend this pattern too unthinkingly.
Denny H Kalyalya: High performance leadership Opening speech by Dr Denny H Kalyalya, Deputy Governor of the Bank of Zambia, at the Opening of the High Performance Leadership Workshop, Lusaka, 9 August 2010. *  *  *    Chairperson    Workshop facilitators from MCA International    Directors and Assistant Directors    Other Participants    Ladies and gentlemen  On behalf of Bank of Zambia Senior Management and indeed on my own behalf, I wish to welcome you all to this important workshop, on High Performance Leadership, organized by our Human Resources Department in conjunction with MCA International. I commend the Human Resources Department for taking the initiative to organise this workshop, which is intended to facilitate exchange of information and views on appropriate leadership attributes to help us enhance our performance as leaders in our respective positions. Ladies and gentlemen, as you are aware, our key role as a central bank is to deliver low and stable prices and maintain financial system stability. In spite of the global economic downturn, our country is enjoying relative economic stability, with good prospects for the future following the recent and on-going significant economic transformation of our economy. Due to implementation of appropriate macroeconomic policies: i. The country has registered positive real GDP growth for the past 10 years and over the last five years, real GDP growth rate has averaged 6% annually;  ii. Inflation and exchange rates developments have also been favourable.