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Give The Falling Property Market A Push


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#1 easy2012

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Posted 04 August 2010 - 02:16 PM

http://www.ft.com/cm...html?ftcamp=rss

(need registration to read). I think the writer is spot on.

Give the falling property market a push

By Neil O’Brien

Published: August 3 2010 20:14 | Last updated: August 3 2010 20:14

Last month British house prices fell for the first time since February, prompting gloomy headlines about a possible second recession. The fact that rising house prices are reported as a good news story, however, remains rather curious. We do not celebrate when a loaf of bread goes up in price, or cheer for a hike in the cost of a car. For homeowners, of course, the rising cost of houses is offset by a rise in the value of the asset they hold. Prices also rise during good times, while recessions bring falls. But in reality rising house prices do not cause growth, they help to choke it off.

For any number of reasons, David Cameron should be taking steps to drive down the price of housing. For a cash-strapped government the costs should be obvious. Expensive houses mean bigger wage demands from public sector workers. They have also pushed up the housing benefit bill by £8bn since 1997, while blocking people from leaving social housing, doubling the waiting list and locking many families in dependency. Rising prices have also choked off a right-to-buy programme that used to generate billions in revenues.
EDITOR’S CHOICE
Council tenancies for life face axe - Aug-03
House sellers feel heat as lull hits prices - Aug-03

For individuals the cost is less obvious, but no less real. Property prices are embodied in everything you consume. The sandwich you buy at lunchtime costs more if the person who made it has to pay higher rent. Furthermore, rising house prices transfer wealth from poor to rich, and from the young to the baby boomers. They contribute to the inter-generational tension that Tory minister and thinker David Willetts has christened “The Pinch”. By 2009, nine out of 10 first-time buyers needed support from their parents, entrenching the transmission of wealth or poverty from one generation to another.

It would be helpful, therefore, to reduce the price of housing. Fortunately, decades of rising prices have mainly been the result of supply constraints imposed by the government itself. To get a sense of how much value is locked up by our rigid planning system, look at how much permission is worth. Land designated for agriculture costs, on average, less than £20,000 a hectare. The same land with residential planning permission costs an astounding £1.87m.

Tight planning controls mean less house-building, and therefore higher prices. Government figures suggest that 100,000 fewer new homes every year raises prices by 12-14 per cent over the next decade. As Alex Morton points out in a forthcoming paper for Policy Exchange, the past decade saw just 160,000 new homes a year – less than half the 360,000 built each year in the 1960s. Our new homes are smaller too, making the real reduction in supply even greater.

As the homelessness charity Shelter recently pointed out, if other costs had risen as fast as house prices since 1970, a supermarket chicken would now cost £47. Indeed, this constriction in supply is now so severe that home ownership rates have started to fall back for the first time since the first world war. Of course, it is not wrong to want to stop development near your house. Indeed, it is often entirely rational. But the social costs are substantial, if more widely dispersed.

Setting a new target to reduce the price of housing would make this trade-off much more visible. How would a target work? Just as with the Bank of England, the minister for housing could be instructed to write a letter to the chancellor when prices veer too far off target. Such a letter would set out steps to get them back on track. Alternatively, rising prices could automatically trigger a relaxation of planning laws.

Such a target need not result in the type of negative equity that so frightens homeowners. Professor Tim Leunig at the London School of Economics has shown that prices could fall by “around 2 per cent in nominal terms per year” without creating or increasing negative equity, because people pay off their mortgages at the same time. If we were less ambitious, we could target nominal stability over the long term, and simply let inflation reduce the real price.

To be fair, the new government is reforming planning law. But its objective is not clear. Ultimately, if we do not want spiralling prices, then, as Mr Cameron noted during the election, “we’ve got to build more houses”. That is the right aspiration, but to achieve it his government should be bolder, and move to break Britain’s house price ratchet once and for all.

The writer is the director of the think-tank Policy Exchange



#2 Frank Hovis

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Posted 04 August 2010 - 02:18 PM

A target to reduce the price of housing. If only!
High house prices - wrecking economies worldwide since 2003

#3 exiges

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Posted 04 August 2010 - 02:21 PM

More houses for more people.. or fewer houses for fewer people.
Constant growth the cancerous cure, a swarming race of profiteers ensure cheap cars for the rich, cheap lives for the poor, cheap weeks in the sun, free drinks at the door. Puerile propaganda plugs up the TV, keep folk following the money so they'll never be free.

Bankrupt schools grind out fool after fool then feed them to a system where idiots rule. Polling booths, phone votes, bogus questionnaires, you get a say as if anybody cares. Joe Public doesn't want to play so liquidate his life as he looks the other way.

Should you stand and fight, should you die for what you think is right so your useless contribution will be remembered? If you're asking me I say no, surrender -- Author: Justin Currie - Song video

#4 kilroy

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Posted 04 August 2010 - 03:18 PM

LEAVE OUR PROPERTY PRICES ALONE!

#5 Reluctant Heretic

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Posted 04 August 2010 - 03:34 PM

This journalist is worth his weight in gold but then again he is only stating the blindingly obvious. The problem with his argument is that such policies would be in the national interest and not in the interest of a small but powerful/vociferous minority therefore it is unlikely that any government will embrace it. Now I'm stating the obvious. :(

Hmmm ... new thought... just read 'Policy Exchange' website - endorsed by Boris Johnson, Michael Gove, George Osborne ? !!!! So does this mean that politics is now seeking to be driven by common sense? There's radical for you. :o

Edited by Reluctant Heretic, 04 August 2010 - 03:56 PM.

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and ...
... Speak your truth quietly and clearly, and listen to others,
even to the dull and ignorant;
they too have their story.
Avoid loud and aggressive persons;
they are vexatious to the spirit ...
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and everywhere life is full of heroism ..
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#6 Tired of Waiting

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    Too much credit + planning blockage = house price bubble

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Posted 04 August 2010 - 06:24 PM

This journalist is worth his weight in gold but then again he is only stating the blindingly obvious. The problem with his argument is that such policies would be in the national interest and not in the interest of a small but powerful/vociferous minority therefore it is unlikely that any government will embrace it. Now I'm stating the obvious. :(

Hmmm ... new thought... just read 'Policy Exchange' website - endorsed by Boris Johnson, Michael Gove, George Osborne ? !!!! So does this mean that politics is now seeking to be driven by common sense? There's radical for you. :o


Is this "Policy Exchange" one of the coalition's think tank?! If so - jeez that is good news.

And it would confirm that other thread, a few weeks ago, linking some news about the Treasury, under the new coalition, wanting to bring HP down by around 25%.

Did you see that thread?
.

High property prices increase: living costs; production costs; and government costs - hence all prices , and taxes!


This also reduces Britain's international competitiveness, impoverishing all of us, including property owners




And NIMBYism is evil.


.

#7 the flying pig

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Posted 04 August 2010 - 07:01 PM

unfortunately most of the tories' support comes from the middle aged & blue rinse brigades who couldn't even spell 'conservatism' or 'free market' or 'capitalism' or 'libertarian' or whatever else the politicians would hope they stand for, but who know that they don't like their taxes being used to allow immigrants to give diana's memory cancer [or whatever other ******** the daily mail has cooked up on that day] and most definitely know that, as kilroy says, they want their house prices left alone. so i won't be holding my breath.
"HOUSE PRICES FALL AGAIN", Daily Express, 28th Dec 2007... "HOUSE PRICES RISING AGAIN", Daily Express, 29th Dec 2007

#8 Si1

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Posted 04 August 2010 - 07:30 PM

unfortunately most of the tories' support comes from the middle aged & blue rinse brigades who couldn't even spell 'conservatism' or 'free market' or 'capitalism' or 'libertarian' ...


indeed - but they are getting a bit old now, and are outnumbered by 'liberal' (providing they get a bigger slice) boomers

the tories see an opportunity with post-boomers by making housing affordable - a generation of grateful tory voters

Edited by Si1, 04 August 2010 - 07:31 PM.


#9 JMcLane

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Posted 04 August 2010 - 07:33 PM

Oh I would love to see a change in attitude. I so want a home but I cannot shake the niggling feeling I have about a coming seachange (nothing to back it up apart from the bad and good news that I read) which I just know will happen the day after I move in. I dont mind loosing some of my cash in a decline but anything over my deposit would really annoy me.

The RSPCA is crying out for people to home dogs and that is the only reason I want my own home, so I can hang the TV and have some dogs.

#10 Freeholder

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Posted 04 August 2010 - 07:41 PM

Policy Exchange is a British conservative think tank based in London. The Daily Telegraph has described it as "the largest, but also the most influential think tank on the right".[1] The New Statesman called it as David Cameron's 'favourite think tank',[2] a view shared by the Political Editor of the Evening Standard, Joe Murphy, who referred to it as ‘the intellectual boot camp of the Tory modernisers’.[3] Its alumni include Anthony Browne, one of London Mayor Boris Johnson’s policy directors, and a number of individuals identified by The Guardian as being the ‘thinkers behind fresh Tory policies’.[4]

http://en.wikipedia....Policy_Exchange

There is, I think, hope.

#11 Tired of Waiting

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    Too much credit + planning blockage = house price bubble

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Posted 04 August 2010 - 07:46 PM

Oh I would love to see a change in attitude. I so want a home but I cannot shake the niggling feeling I have about a coming seachange (nothing to back it up apart from the bad and good news that I read) which I just know will happen the day after I move in. I dont mind loosing some of my cash in a decline but anything over my deposit would really annoy me.

The RSPCA is crying out for people to home dogs and that is the only reason I want my own home, so I can hang the TV and have some dogs.


Same here!
.

High property prices increase: living costs; production costs; and government costs - hence all prices , and taxes!


This also reduces Britain's international competitiveness, impoverishing all of us, including property owners




And NIMBYism is evil.


.

#12 TeddyBear

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Posted 04 August 2010 - 08:27 PM

Sounds like a lot of posts from here....I think the writer must be a member!
LONDON, April 5, 2004 – The Rt Hon Gordon Brown, MP, Chancellor of the Exchequer, today officially opened Lehman Brothers’ new European headquarters building at 25 Bank Street, Canary Wharf, London.

Commenting on the event, the Rt Hon Gordon Brown, MP, Chancellor of the Exchequer, said: “I would like to pay tribute to the contribution you and your company make to the prosperity of Britain. During its one hundred and fifty year history, Lehman Brothers has always been an innovator, financing new ideas and inventions before many others even began to realise their potential. And it is part of the greatness not just of Lehman Brothers but of the City of London, that as the world economy has opened up, you have succeeded not by sheltering your share of a small protected national market but always by striving for a greater and greater share of the growing global market.”

#13 easy2012

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Posted 04 August 2010 - 09:52 PM

unfortunately most of the tories' support comes from the middle aged & blue rinse brigades who couldn't even spell 'conservatism' or 'free market' or 'capitalism' or 'libertarian' or whatever else the politicians would hope they stand for, but who know that they don't like their taxes being used to allow immigrants to give diana's memory cancer [or whatever other ******** the daily mail has cooked up on that day] and most definitely know that, as kilroy says, they want their house prices left alone. so i won't be holding my breath.


Don't agree with this generalisation. Many BTL landlords are Labour supporter and have benefited hugely from Labour's policies (crazy HB system etc)

Many Tories voters are sensible business people who know that high properties prices (residential and commercial) are not good for the economy. Even for the middle aged brigade, the ability of their children to buy a decent place to live must have started to worry them.

#14 (Blizzard)

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Posted 04 August 2010 - 10:03 PM

....It would be helpful, therefore, to reduce the price of housing. Fortunately, decades of rising prices have mainly been the result of supply constraints imposed by the government itself. To get a sense of how much value is locked up by our rigid planning system, look at how much permission is worth. Land designated for agriculture costs, on average, less than £20,000 a hectare. The same land with residential planning permission costs an astounding £1.87m...


How much of the difference in price is caused by the difficulty of borrowing against land without planning permission, and not just the scarcity of such land?
"As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them; and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land ...." — Adam Smith: The Wealth of Nations[17]

#15 Traktion

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Posted 04 August 2010 - 11:41 PM

Is this "Policy Exchange" one of the coalition's think tank?! If so - jeez that is good news.

And it would confirm that other thread, a few weeks ago, linking some news about the Treasury, under the new coalition, wanting to bring HP down by around 25%.

Did you see that thread?


I notice the Adam Smith Institute is becoming rather vocal. As the name suggests, they are rather into the idea of a Land Value Tax too (http://www.adamsmith...land-value-tax/, http://www.adamsmith...land-value-tax/). As well as TV Licence changes, but I'll leave that one in the other thread! :lol:

With the Cobden Centre also discussion changes in the monetary system, it seems we're having a flurry of new groups airing their views. It's such a breath of fresh air.
Hayek: Denationalisation of Money - Competing, alternative currencies and breaking the money monopolies.
Bitcoin - Free market, distributed, open source, e-currency.
Against Intellectual Monopoly - Stop the rent seeking through legal monopoly.
Freedomain Radio - Philosophical commentary and debate.
Khan Academy - Free market education, funded by voluntary donations.
Community Land Licencing - A distributed, non-state, alternative to land value taxation.




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