Timmy elsewhereJune 8, 2014 Tim WorstallTimmy Elsewhere7 CommentsAt the ASI. We have progress, even the Labour party is beginning to understand why housing is so expensive. previousAh, so they don’t understand tax incidence thennextTraveling Timmy 7 thoughts on “Timmy elsewhere” MatGB June 8, 2014 at 10:11 am *cough* “he scarcity value of the mermission slip to build a h” The last sentence is a bit problematic as well 😉 bloke in spain June 8, 2014 at 10:53 am If only the explanation for the high price of housing was that simple. A large proportion of the price of a property is based on the expectation property prices will continue to rise. That supply will continue to not meet demand.The “investment” element. If supply matched demand the “investment” premium would disappear, prices fall & owners who’d paid above the “utility” value be in negative equity. Essentially, a large amount of paper “wealth” would evaporate taking with it a large slice of the economy. Kevin B June 8, 2014 at 1:00 pm bis: So we’ve dug ourselves into this huge great hole whereby a large part of the UK’s ‘wealth’ is tied up in expectations of rising house prices. How, oh how, can we begin to get out of this ever-deepening hole? Isn’t there an answer to this question that goes something like “If you’re in a hole, first stop digging…” Tim Newman June 8, 2014 at 1:40 pm Basically what BiS and Kevin B said. It’s the planning permission which makes houses expensive, but the root cause is that the electorate (made up of homeowning middle classes, who are as self-serving as they are deluded) wants it kept that way. This is why the planning permission issue never gets addressed. abacab June 8, 2014 at 1:59 pm Don’t forgot the low cost of borrowing contributing to high prices – unless you pay cash, a house doesn’t really cost 300k, rather 60k + 1k a month (or whatever) for 25 years. bloke in spain June 8, 2014 at 2:45 pm Abacab nails the root cause. Credit creation. If the banking system didn’t create the credit then the prices couldn’t be met. My own thoughts are to end banks ability to lend against the security of the property being purchased. Looked at with a modicum of sanity it’s one of the riskiest “investments” imaginable. Simplest would be ending bank deposit guarantees. If account holders regarded giving money to banks as the risk it really is,banks would be constrained on the lending side. The low interest rates are simply a product of the risk of lending on property being socialised rather than being carried where it should be. With the lenders. benj June 9, 2014 at 9:59 pm http://www.conservativehome.com/thecolumnists/2012/12/andrew-lilico-the-2011-census-data-confirm-once-and-for-all-that-the-notion-of-a-housing-shortage-in.html Of course housing used to be more affordable in the past. We had higher property taxes, rent controls and council housing. The majority of any gains in productivity are always syphoned off into land rents. Which is why if you build more houses where people want to live and work, aggregate house prices will rise. Build them where people don’t, and they will fall. The sum of all good State regulation increases aggregate rental values, the sum of all bad regulation lowers them. This is something the build, build, build lobby need to think about, and understand. A question for TW. Does issuing more low value shares in a monopoly negate the harmful effects of it? Or does it make matters worse? Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.