That's not typically how macroprudential regulation works. You raise the deposit requirement to take the froth out of the demand side of the market - but the people doing the supply side know that once the situation is level the requirement will be reduced again, so their budgeting for what to build shouldn't be affected. In general, if the market is maintained in a more orderly fashion this way, there is less risk of busts and bad debts, which should make financing more efficient and that ought to be good for house builders who can invest their capital with less need for hedging - more than compensating for the brief flurries of higher margins that bubbles bring to them.
For the consumer it has the virtue (in theory) of opening up the house building market to competitors who would previously have shunned it because of those risks. It makes finance available for smaller outfits that will buy up a plot of land and get on with turning that round straight away. And for the wider economy it means you don't have to do violent things to interest rates and so on that affect business investment in order to control the housing market.
Driving rents up is part of the process. The 'fair value' of a property is a reflection of its rental value - to decide what price you would rationally pay to purchase a house you need to know what it would cost to rent it. House prices are generally seen as inflated when they are more expensive to own than to rent, so increasing rent automatically increases fair value.
Note that this has nothing to do with incomes - if nobody can afford to rent or to buy, then either incomes are too low, or supply is too constrained. That is not the same as requiring that house valuations be decided by income levels - which would damage the ability of an economy to reduce prices by increasing supply. And don't forget that the situation is further muddied by other fair values. That term also applies to any financial instruments that are used to resell or insure the debt that accrues on the property - which is why a steady and sustainable market (with low levels of mortgage default) reduces financing costs by bringing down fair value of the risk offset. See how circular the whole thing is.
That seems to be the plan over here. Although as far as I am aware the only useful supply side change has been to allow more shops and offices etc to be re-purposed as accommodation. I think they really need to do a lot more than that or else the bubble Cassandras will be correct. At the moment there is no need for them to be, but the UK construction sector is under-productive and a drag on growth, so more than one thing needs to be done to kick it back into life. This policy is probably ok as one of them, but I don't see the others happening by at the proper rate which is a problem.
