Sunday, May 13, 2007
An unusual take on why freeholds are inherently inaffordable and inefficent for most households
No Monkey Business blog: The housing ladder: what exactly pushes it out of reach?
This blog aims to provide professional insights into what really makes markets tick. In this post, I show how freeholds and very long leases normally involve over-investment, as the cost exceeds the lifetime benefits of ownership the ladder delivers. This excess investment has a value experienced as plugging a hole in pension saving or a bequest to heirs. Neither justifies having to pay more for property than lifetime enjoyment. Why are these arguments unfamiliar? I suggest it is because high inflation and discount rates meant earlier generations did not have to pay for the surplus 'duration' of the property. However, when prices are 50% above 'normal', as currently, this duration mismatch will not be the dominant factor for affordability.
Posted by stuart fowler @ 07:38 PM (379 views) Add Comment
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