So, yes, house prices are very high. So, yes, we\’d rather like to have lower house prices. In order to work out how to lower house prices we need to work out why house prices are high. The Murphmeister:
There is no doubt at all that current house prices are massively over-inflated. That is because banks lent too much on the security of land.
Therefore Murph reaches for the one weapon to cure all ills, very much higher taxes on everyone and everything.
However, banks have not lent too much on the security of land. The land underlying a batch of Barratts is worth perhaps £1,000, £1,500 a house. Build costs are around £100,000, yet the banks are lending £200,000, perhaps £300,000 against these rabbit hutches.
They\’re not lending against the security or value of land. They lending against the scarcity value of planning permission to place a house on that piece of land.
And that is what makes housing in the UK expensive: the scarcity value of planning permission. And we know how to reduce the price of something which has a scarcity value. Reduce the scarcity of course.
So we do not need to tax everything that doesn\’t move, glorious though Ritchie would find such a measure. What we actually need to do is just issue more planning permissions. The scarcity value of them thus declines and housing becomes cheaper.
So what we\’d like to see happen is a government willing to take on the Nimbys, the county set, the idiot enviros, and agree that perhaps housing might be allowed to expand from some 2% of this green and pleasant land to maybe 3%. By, perhaps, assuming a right to develop rather than insist on proving a need for development as presently?
Oops! Yes, sorry, forgot. The current government is doing just that, isn\’t it? So that can\’t be the right answer as they\’re Bastard Tories, aren\’t they?