back to article Britain's housing crisis: What are we going to do about it?

We talked last week about how macroeconomics is still pretty terrible at telling us what we ought to do about the world around us, which is why I always rather scratch me head at people who insist that rent control is going to be a good way of solving our current housing crisis. For amongst economists, there's a pretty good …

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  1. Anonymous Coward
    Anonymous Coward

    Where I am.

    the opposite is almost true. Seaside town the rents are higher than purchasing the property.

    House I bought worked out over £100 less per month to buy and it would have cost to rent. Several friends who have bought found the same thing. This is probably due in part to the seaside tax. Lots of people moving down here because they do like to be beside the seaside, staying in flats or apartments while they search for a new job etc.

    Then the realize they get paid about 30% less for doing the same job they were doing before, and the nearest "insert common highstreet store which isn't a clothes shop" is about an hours drive away.

    Rent stays high (for locals) because the richer folk from london etc move down here temporarily and can afford it, and houses stay (relatively) lower because none of these rich folks want to stay when they realize we have sweet FA down here.

    1. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      > House I bought worked out over £100 less per month to buy and it would have cost to rent.

      Sorry but this isn't new, when I first tried to get onto the housing ladder, more than 30 years ago, my wife and I had exactly the same problem in outer London. We couldn't buy anywhere because the needed deposits were going up faster than we could save and the rental costs were higher than mortgage would have been if we could have got one. Once we could buy somewhere out out goings dropped significantly.

      How much have the rental values shot up since the demise of 100% mortgages? I'd be willing to bet that its a lot more than house prices have. A few people cocking up there mortgages have caused problems for the massive majority that wanted to buy houses.

    2. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      "House I bought worked out over £100 less per month to buy and it would have cost to rent."

      So the money you put it with current ~zero interest (and 30 year loan?) is still ~free when the interest rate is 10%, likely in next 10 years? AFAIK fixed rate loans are very much US thing, not usually given in Europe.

      As the housing bubble is at maximum point now, it's also obvious that the value of housing assets can only go down in same period of time. Some say 50%, some say less: A significant amount of money in any case.

      Depreciating, heavily taxed asset (house, apartment) isn't something you'd want to buy in asset bubble, no matter what. Even gold, as non-taxed asset, would be better.

      1. JeffyPoooh Silver badge
        Pint

        Re: Where I am.

        AC: "...the housing bubble is at maximum point now..."

        1) It's not a bubble

        2) It's rarely a bad time to buy real estate (exceptions are obvious)

      2. LucreLout Silver badge

        Re: Where I am.

        "when the interest rate is 10%, likely in next 10 years"

        Whatever else may happen, this will not.

        Base rates are forecast to rise by 0.25% per quarter to a towering height of around 5%. That will take about 5 years, by which time we'll be getting ready to cut rates again due to the next recession.

        10% may come, but its unlikely to do so before 20 years time, by when you could have paid off any mortgage taken today.

        1. Anonymous Coward
          Anonymous Coward

          Re: Where I am.

          "Base rates are forecast to ..."

          These forecasts of which you speak, where did the crash of 2007/2008 figure in them?

          Tealeaves would have been just as effective.

    3. JeffyPoooh Silver badge
      Pint

      Move to Canada

      Or Australia, if you don't mind waking up to poisonous animals in your bed.

      I wonder if the aging demographics might result in more retired people moving out of the big metropolitan areas and into the far corners. I've already got some land on a small Asian topical island lined up. Hopefully it'll be wired up to the 'net before I get there.

    4. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      Ummm.... isn't that obvious? Any property is going to cost more to rent than to buy, otherwise the landlord would be operating at a loss...

      1. Anonymous Coward
        Anonymous Coward

        Re: Where I am.

        No, he's not running at a loss. You're paying the bulk of his mortgage, so he's gaining equity in the house while only putting in a small fraction of it himself. If he sells the house he realises the money you've contributed.

  2. Credas Silver badge

    MORE regulation might help the situation

    Perhaps an even more useful approach to the problem would be to make it as desirable to rent as to buy. Outside the social sector, at the moment renters are treated like serfs, on short-term leases that leave them liable to being thrown out with almost no notice, and with restrictions that make it a rarity to even be allowed to keep a small dog, or choose their energy supply. Compulsory standard rental agreement terms that allowed people to make a rental property their home, rather than some kind extended holiday let, might temper the obsession we have with owner-occupation in this country.

    1. Anonymous Coward
      Anonymous Coward

      Re: MORE regulation might help the situation

      ".....might temper the obsession we have with owner-occupation in this country."

      Not an obsession but a given goal, a result of continuous propaganda.

      Those guys with big money, banksters, get a lot richer everytime someone buys a house/apartment: Poor buyer pays the price once to seller and two times to bank (30year loan): No wonder banks (and rich people in general) have constant propaganda about "buying a house being a wise investment".

      News flash: In general it isn't. £250k to stocks bring you about 5% yearly, no tax whatsoever. With that you can pay the rent for ever and still have basically cash for whole amount, movable money.

      Which an house isn't.

      1. Adam Foxton

        Re: MORE regulation might help the situation

        Thats as may be.

        But if I had the £250k to buy the stocks and shares I wouldn't need a mortgage, would I?

      2. JohnMurray

        Re: MORE regulation might help the situation

        Bearing in mind that the bank didn't lend you any money. The balance they created in your account didn't exist until created. So you're paying interest on nothing!

        www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity

      3. LucreLout Silver badge

        Re: MORE regulation might help the situation

        "News flash: In general it isn't. £250k to stocks bring you about 5% yearly, no tax whatsoever. With that you can pay the rent for ever and still have basically cash for whole amount, movable money."

        Oh dear. You've got this badly wrong.

        Current FTSE 100 yield is about 3.5%, giving you just £8,750 to rent a £250k house. Good luck with that.

        If you think stocks are "basically cash" then you understand neither stocks, nor cash, and certainly not housing.

        1. Omgwtfbbqtime Silver badge
          Angel

          Re: FTSE 100 yield is about 3.5%

          True, however careful choice of investments can give somewhat higher. My SIPP is currently running around the 18% p.a. mark, if I had paid a little more attention and liquidated my small caps I could have made 25%+ this year. 30% if I wasn't limited in my choice of investment.

          Working for one of the big 4 I need to be careful not to invest in any of our clients, I really don't need internal compliance asking me those type of questions.....

  3. Dave Bell

    People can be silly

    Not every site is equal, and people can do the silliest things when picking pieces to build houses.

    For example, the sewage from one village is pumped, under pressure, over a couple of hills to a neighbouring village's sewage works. A developer applied for planning permission on some land in the valley, saying that all that was needed was a simple connection to this pressurised pipe.

    In the same area, the council granted planning permission for housing development on a site that was on noticeably lower ground than the sewage works. See also "flood plains".

    So people will do the silliest things. And the people who decide planning applications can be just as silly. But zero controls look pretty reckless. And some of the ways in which development is distributed are questionable. It looks as though new housing is often distributed in strict proportion to existing housing, without regard to local availability of either employment or services.

    The system is flawed, but can we throw away all controls to leave it to the market? The whole idea of the market assumes honesty and rational behaviour, yet we know that assumption is questionable.

    1. John Sanders
      Holmes

      Re: People can be silly

      Free market doesn't mean lack of regulation.

    2. Anonymous Coward
      Anonymous Coward

      Re: People can be silly

      "The system is flawed, but can we throw away all controls to leave it to the market? "

      No. The market is looking for maximal profit, now. Therefore it will buy a land outside of any eletricity/water pipe/sewer systems/roads, build houses on it to the hilt and then reap the enormous profits as the land (former moor) didn't cost a thing while the price of a house is almost constant outside of the city.

      Society is then almost forced to build everything from scratch to a far away place as there are thousands of people living there and builders&banksters made obscene profit while huge amount of tax money is wasted.

      Of course planning doesn't change much: When you have tens and hundreds of millions in budget, like market does, bribing planners is a rule and not an exception. Everywhere: That's painfully obvious when you see what happens in reality.

      1. Anonymous Coward
        Anonymous Coward

        Re: "bribing [councils] is a rule and not an exception."

        "bribing planners is a rule and not an exception."

        It's even legal in (some of) the UK. It's called Section 106. It's well documented, although rare to hear it explicitly called bribery. But that's what it is.

        1. Anonymous Coward 101

          Re: "bribing [councils] is a rule and not an exception."

          "It's called Section 106. It's well documented, although rare to hear it explicitly called bribery. But that's what it is."

          No it's not. A bribe is where the planners were taking the money in brown envelopes for their own use. The Section 106 money is paid to the council and is usually used for improvements to local amenities.

  4. Camilla Smythe Silver badge

    Solution

    "The LA said that actually, as it was now part of the park and had no planning, it was only worth £50k. That £1.4m was the value of the chitty that enabled housing to be built on that sliver of land."

    1) Take off and nuke London from Orbit.

    2) Everyone left over apart from those involved in the 'collateral carnage' watches Emmerdale Instead.

    3) Re-instate Chitty[s].

    4) Profit.

  5. Yet Another Anonymous coward Silver badge

    Economists solving the problems the last one caused

    Allow essentially unrestricted building in the south east

    Builders want to maximise profit - they still need you to pay as much as possible for a house. So instead of building high density low price housing on vacant lots they build estates of million quid McMansions on 1/2 acre lots (just like every US city from Houston to LA)

    You now have a suburb that stretches from London to Dover.

    The density is too low for public transport to work so everyone has to drive into London

    So you need to build 8 lane motorways into London (just like every US city from Houston to LA)

    So you need to knock down a lot of cheap high density housing on the routes into the city.

    Housing problem cured, transport problem is a matter or the government, can't expect developers to be restricted by red tape and costs of public transport, just privatise the roads - then economics will cure it.

    1. h3

      Re: Economists solving the problems the last one caused

      This article is nonsense. Rent Control is the way forward and the only answer.

      There is no reason for a house to cost more than the materials used to make it / cost of the land / cost of building it.

      (And I say this as someone who will probably get 0.5 million £ due to it that I don't need in the next 20-30 years).

      What these people want is a system where if you are born poor you die poor and there is nothing you can do about it which is absolutely wrong.

      1. Spoonsinger

        Re: Rent Control is the way forward and the only answer.

        Sorry, Rent Control isn't the answer. All that does is put an extra level of bureaucracy to a critical supply/demand situation. That extra level of bureaucracy will skew the rents by a) location of the administrators of the policy, (i.e. London), and b) Housing Benefit - which is seen as a base line to the actual rental market regardless of location, and c) The lack of control on people who still have a mortgage/debt but are able to get an an additional mortgage to buy a property in order to rent - The paid rent of which is probably backed up by Housing Benefit.

        1. Anonymous Coward
          Anonymous Coward

          Re: Rent Control is the way forward and the only answer.

          "All that does is put an extra level of bureaucracy to a critical supply/demand situation."

          False: There's no supply-demand situation here, but clear cut blackmailing: Either you pay what the seller is asking or you die to yard: It's cold outside.

          There's no "demand" when not buying is not an option, at all: It's all mandatory and not even "market", but a race of who can blackmail most from other people.

          It has to have some regulation or it's just robbery. Some say it already is and I tend to agree with them.

          But one thing is obvious: There's no such thing as "supply/demand" when you absolutely must buy and there are no (viable) alternatives either.

      2. John Sanders
        Holmes

        Re: Economists solving the problems the last one caused

        """There is no reason for a house to cost more than the materials used to make it / cost of the land / cost of building it."""

        Yes, there is a reason and it is the same reason for every market imbalance in which the price is completely inflated: "Artificial Scarcity"

        One of the 'politicos' speciality.

        1. Alan Brown Silver badge

          Re: Economists solving the problems the last one caused

          > Yes, there is a reason and it is the same reason for every market imbalance in which the price is completely inflated: "Artificial Scarcity"

          And of course the people who can abolish this are the same people in a position to profit the most from the status quo.

          I live in surrey. The hypocrisy about "saving our village" (most of which is 1930s era housing) lumbers on and on and on - and the most fundamental objection raised to allowing new housing is that "it lowers property values"

          1. Tim99 Silver badge

            Re: Economists solving the problems the last one caused

            @Alan Brown

            The hypocrisy about "saving our village" (most of which is 1930s era housing) lumbers on and on and on - and the most fundamental objection raised to allowing new housing is that "it lowers property values"

            My late father was a (very) senior local government officer. He said that the most strident NIMBYs were always the most recent people to move into a village. He thought that their attitude was "I have moved here, now nobody else should be able to, and nothing must change". The people wanted new housing and new employment opportunities were almost always those who were born there.

            The people who did not want a new by-pass around villages were almost exclusively those who did not live there (or did not want it going past their very large attractive 100+ year old properties, on the outskirts, near the new road).

          2. LucreLout Silver badge

            Re: Economists solving the problems the last one caused

            " the most fundamental objection raised to allowing new housing is that "it lowers property values""

            I can see why, for the young, lowering property values is fundamentally a good thing.

            The difficulty is that it effectively bankrupts Generation X who had to buy the overpriced houses off the first wave of Baby Boomers, and are now stuck with large mortgages. The sceond wave of Boomers is sitting on more than enough equity to cushion the fall.

            Of course, when Gen X go bankrupt, that will bust the banks, and result in a depression so large, nobody will be able to borrow money for anything. The economy will fail, and things will turn bad, fast.

            The only realistic option for reducing the cost of housing is to return to MIRAS, allowing the interest to be discounted from earnings prior to taxation being paid - much like it is for Buy To Let.

            Building more houses won't work, because by the time the extra infrastructure is costed in (schools, hospitals, roads, dentists, doctors, trains, busses etc), nobody could afford to buy the houses in the first place - they'd be considerably more expensive than those already on the market. Let's face it, the government is broke, so they can't pay it, and nobody is going to vote to pay more tax to fund it - direct taxes are at breaking point as it is and can only realistically move down from here.

            1. Squander Two

              Re: Economists solving the problems the last one caused @ LucreLout

              > The difficulty is that it effectively bankrupts Generation X who had to buy the overpriced houses off the first wave of Baby Boomers, and are now stuck with large mortgages.

              Stuck for how long? 25 years. So phase in the change over 30 years. Problem solved.

              1. LucreLout Silver badge

                Re: Economists solving the problems the last one caused @ LucreLout

                "Stuck for how long? 25 years. So phase in the change over 30 years. Problem solved."

                Except that it isn't solved.

                Any change you telegraph over any timescale you choose has an impact starting the moment you announce it. See Gordon Brown and what will forever be known in the gold markets as "The Brown Bottom".

                Nobody will pay a 10, 20, or 30 year mortgage to get to the end of it and watch the state take half their house value. Everyone would look to downsize now or default on the mortgage.

                If you want to reduce the value over time, then you need to build enough to slow increases below the rate of inflation while telling nobody what the plan is... the problem is, we don't build even half the houses needed to achieve that.

                Prices can come down in real terms, without harming existing value, if you cut taxation. That would require significant real cuts to the public sector to fund it. Real as in the sense that your budget this year is X and next year it is 3/4 X. Again, not a vote winner.

                The simple fact is that the young prospective FTBs are going to have to make a hard choice, and right & wrong, morality, and ethics don't come into it.

                Option 1) If you want to live in the same sort of house in which you grew up, in the same sort of area, then you will have to work a lot longer than your parents to fund that.

                Option 2) Emigrate to somewhere with cheaper housing.

                Option 3) Buy a significantly smaller house or flat than you expect.

                For that list of choices, the Baby Boomers should feel everlasting shame, for it is they, not Gen X, that created the mess to their own advantage.

                Daydreaming of taking housing value from those that have it by state sanctioned theft, to give it to those that don't have it, is just that, daydreaming. Half priced houses aren't coming... if they did, you'd get outbid by prospective or existing landlords.

                1. Squander Two

                  Re: Economists solving the problems the last one caused @ LucreLout

                  > the Baby Boomers should feel everlasting shame, for it is they, not Gen X, that created the mess to their own advantage.

                  Couldn't agree more.

                  > Nobody will pay a 10, 20, or 30 year mortgage to get to the end of it and watch the state take half their house value.

                  In what conceivable way would the state be taking anyone's house value? The suggested policy is that the state give permission for more houses to be built.

                  > Any change you telegraph over any timescale you choose has an impact starting the moment you announce it.

                  Yes, which is fine. People can change their behaviour over very short timescales -- and changing behaviour is of course the whole point of the policy. The problem with mortgages is that they take your behaviour and preserve it for a quarter-century, putting you at a disadvantage to people who can change their behaviour quickly. So announcing the policy now stops people taking out inapproriate mortgages now while enacting it in 30 years protects the people who made decisions recently which were appropriate then but will not be after the policy is enacted. Yes, people's houses will end up being worth less than they've paid for them, but that isn't a problem if (a) they've paid off their mortgages in full, so there's no negative equity, and (b) the effect is market-wide (which it would be), so it doesn't impact the ability to upgrade to a better house.

                  Obviously there are problems with the policy -- I only said that my idea solves the problem, singular, not that it solves all problems. But there's a huge bloody great problem with allowing one selfish generation to blackmail all future generations too. At some point, we need to break the cycle. People need to be able to afford to live.

            2. Anonymous Coward
              Anonymous Coward

              Re: Economists solving the problems the last one caused

              "when Gen X go bankrupt, that will bust the banks,"

              You mean it will bust the banks AGAIN.

              If banks go bust, so be it, as it would be with any other business.

              If anyone needs protecting it's the savers, and the FSCS do that already.

      3. Tim Worstal

        Re: Economists solving the problems the last one caused

        Err, yes, that's what I'm saying.

        Currently we have "a house to cost more than the materials used to make it / cost of the land / cost of building it." plus the scarcity value of the planning chitty. So, issue more planning chittys and the total price of housing comes down. Issue enough of them (as in the 1930s) and houses will cost "no more than the materials used to make it / cost of the land / cost of building it."

        Where I work in Bohemia houses are actually less than the build cost because there is a surplus. These markets things really do work, even for houses.

      4. rubyduck

        Re: Economists solving the problems the last one caused

        Rent control would be foolish. I remember the 70s.

        A significant proportion of renters receive housing benefit. In the past it was common practice for housing benefit to be paid direct to the landlord. This changed under Labour.

        One consequence of the change is that landlords catering for the low end of the market have raised rents to cushion themselves against non-payment.

        Any landlord with two bits of sense to rub together would prefer a tenant whose rent is paid directly by the local authority, and would be happy to take a lower rent with that kind of certainty.

        WIth that reinstated as common practice, rents should tend to roughly align with the levels of housing benefit determined by the local authority (as long as the local authority is behaving reasonably, of course)

        1. Squander Two

          Re: Economists solving the problems the last one caused

          > Any landlord with two bits of sense to rub together would prefer a tenant whose rent is paid directly by the local authority, and would be happy to take a lower rent with that kind of certainty.

          That's an interesting theory, but is the opposite of what actually happened. The reality is that receiving rent direct from the state meant that there was (a) loads of bureaucracy to deal with and (b) zero chance of avoiding declaring the income, so landlords avoided it like the plague. Anyone who was actually looking for a place to rent before 1997 will remember all the ads which stated up front "No tenants on housing benefit."

          1. squigbobble

            Re: Economists solving the problems the last one caused

            For bonus points, in BradMet the housing benefit cheques go straight to the landlord. That's how my housemate ended up paying rent (after he'd started a job) while his landlord was, unbeknown to him, simultaneously cashing his housing benefit cheques when BradMet comprehensively failed to stop his benefits after he told them he'd started a job. 3 times. Though he ignored my advice of telling them in writing by recorded delivery.

            Out of him and the landlord, guess which one BradMet pursued for benefit fraud and demanded repayment from.

  6. FutureShock999

    But the author's analysis is really, really, simple minded.

    Supply meets demand - true in most cases. But not this one.

    The problem with the housing crisis is that a huge percentage of the top of the market is no longer being actually used to provide housing. It is INVESTMENT, and usually offshore, tax-free, and sometimes illegally-gained investment funded. These houses stand empty, great towering symbols for how wimpy the UK's laws are, and how we are simply being used as a giant game of Monopoly by Russian oligarchs, Arab princess, and drug lords. All because the UKs laws make it very, very easy to escape paying taxes if you can claim foreign investment or transfer of ownership.

    When such a situation exists, the "supply" and "demand" of housing is totally out of balance, because it breaks the relationship between housing and actual income used to pay for it. By making it essentially a tax free game of Monopoly investment for the top of the market, it has introduced distortions that have filtered down to every single level.

    IF you want to solve the UK's housing crisis, it is simple. Close the tax loopholes that have elevated the top of the market and made it a speculator's paradise. This will then correct down the market chain in a few years.

    Oh, wait...you see, that CORRECTION is actually reflected in lower house prices. Which we that are struggling to BUY houses really, really need - but the top 10% of the country (being landholders) do NOT want to happen.

    Which is why, in reality, the problem of housing in the UK is basically unfixable. Because to truly correct it, the landed gentry, and even the upper-middle class, will have to take a huge hit in house valuations. And NO government will let that happen...

    1. William Donelson

      SO TRUE! Well said.

    2. Anonymous Coward
      Anonymous Coward

      @ FutureShock999

      "Close the tax loopholes..."

      But we can't do that! Then who would give us the money we need to con voters into thinking we'll govern in their interests?

      1. Yet Another Anonymous coward Silver badge

        Re: @ FutureShock999

        Or just charge income tax on all house sale profits and inheritance

        1. LucreLout Silver badge

          Re: @ FutureShock999

          "Or just charge income tax on all house sale profits and inheritance"

          All that will lead to is nobody selling any houses.

          I buy at 100k. Sit on it 10 years and sell for 200k as that would be roughly the prevailing rate for the house. You then tax me 50k of that, leaving 150k. How do I buy my next house when it's now 50k out of my reach?

    3. P. Lee Silver badge

      Supply always meets demand - its just the price point where they meet tthat changes.

      The problem with SE England is that its extremely difficult to increase supply - there isn't a great deal of land left where its (politically) possible to build. Supply is reasonably fixed.

      The problem isn't McMansions, the problem is the unwillingness to see low house prices as a good thing, leading to the ever upward pressure. The reason rent control is attractive is that it discourages investment-buying of second and third houses. With less rental income, you can't pay for high mortages, with lower mortgages more people can afford the houses which already exist and everyone is left (after a painful re-adjustment) with more money in their pocket.

      Of course, this assumes that supply is fixed (which it is, in the short term) and that there isn't too much externally sourced demand which will flow in offsetting the drop in domestic demand.

      In short, if you want people to be richer - help them get rid of their debt. Debt is bad for individuals and the economy and the UK is less solvent than places like Greece and Spain.

      1. Alan Brown Silver badge

        "The reason rent control is attractive is that it discourages investment-buying of second and third houses."

        Except that's not what happens. Rent control leads to situations like Rigby's Rising Damp. People will still buy 2nd and 3rd hourses, but in order to maintain income from then, they won't invest in maintenance/repairs.

        Rent control is the path to the rise of the Slumlord. In any case, the SE of the UK is short at least 100,000 dwellings and no amounyt of rent control is going to build new dwellings in the numbers actually required.

        1. Anonymous Coward
          Anonymous Coward

          "In any case, the SE of the UK is short at least 100,000 dwellings"

          Is it really short of that many dwellings or is it just that it is short of dwellings at a certain (perhaps) unrealistic price point? When demand is measured is it what I would term "realistic demand"? I mean, I really really want a nice brand new Aston Martin but there's just such a shortage of them at the £10k price point.

          I agree that rent control will not solve anything but I also am doubtful of the "need for x hundred thousand properties in area y over the next year or two" as it always sounds like a property developer puff piece. Once you stop overseas investment in property - you know, having houses for housing people that actually live here - where does this magical demand figure then sit? My guess is it evaporates much like the shitty rabbit hutch building property developers.

          1. Anonymous Coward
            Anonymous Coward

            population rise

            The number of new houses required is based upon the rise in the population of the UK - The UK population is projected to grow by 400k in 2014, for example, due to a relatively high birth rate and steadily increasing life expectancy.

      2. Chris G Silver badge

        @ P.Lee

        I gave you an upvote but must point out that Spain is very unlikely to be more solvent than the UK when the average Spaniard according to what I have read here is, as a family spending as much as 12%/annum more than their income. Many Spaniards buy cars and other consumer goods over periods of up to 8 or even 10 years after 5 a car is often in poor condition but they are unable to sell it for as much as the balance of the loan so they extend becoming worse off.

    4. Anonymous Coward
      Anonymous Coward

      Perhaps there should be a list of domiciles that are left vacant for >12 months.

      Squatters rights etc. I wonder if that will affect the investment crowd?

    5. Anonymous Coward
      Anonymous Coward

      "And NO government will let that happen..."

      Surely the Labour party exists to do things like this? Although they do have a blind spot on planning... indeed it was them who introduced the Town and Country Planning Act. Has any other piece of UK law done more to transfer wealth from the poor to the rich?

    6. John Sanders
      Facepalm

      """But the author's analysis is really, really, simple minded."""

      No it is not, it goes strictly to the point, artificial scarcity of a good over time produces a distorted market.

      Remove the cause of the distortion and the market fixes itself over time, It will not happen the next day obviously in the same way it took a few decades for the prices of the houses to sky-rocket.

      And I have to say that you're mixing things, what purpose do the people who pay high prices for the house have (being it investment or not) has nothing to do with the cause for the conditions which propitiate the price increase of a good.

      The high prices of any good reflect the market reality, this is the perceived value of the good by the person/s who want to acquire such good.

      There are no dark forces at play here, overseas investors consider the London house market to be a good investment value because they consider that the price of the houses will not go down in the short/medium term, their prices high as they are, are quite stable.

      And that is because houses are scarce thus price rises.

      It is the same with anything really.

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