Monday, May 07, 2007
House Price Cartel or Bubble?
Times: Life’s no house party for the ‘20-20’ generation
If one asked a competent graduate of a business school to design a business plan for a national cartel to raise house prices to the maximum, it would have four elements, all of which exist in our present system.
Posted by nearly30 @ 08:43 PM (142 views) Add Comment
5 Comments
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1. nearly30 said...
Was printed - 16th April - but missed it - so put it up today.
Makes for interesting reading - is there a tacit power struggle between the '20-20s' [they are the graduates in their twenties who are earning something over £20,000 a year.and the "40-40s” — those who are 40-years-old and earn more than £40,000 a year — have an interest in maintaining a high level of house prices. The localised system of detailed planning control puts them in a strong position to protect that interest.?
2. confused76 said...
Sorry disagree with the concept of a cartel: absolutely not applicable to the house market.
Cartels need two things to exist:
1. coordination among members
2. clearly enforceable penalties in case of breach
I see none of the above in the housing market. When sentiment turns, who is going to prevent my neighbour to underprice my property? And what can I do to prevent price competition? WRM suggest that I lobby to keep high barriers to build new property... yeah... that is a great idea! I think WRM should ask a "competent graduate" about cartels before writing in The Times.
As per this fairy tale of the supply and demand... There is a large number of migrants in this country that would take one/two months to pack and go home if the employment conditions and living costs become tougher.
But again, all this is academic discussion before Thursday's BoE rate rise (hope it s going to be 0.5% !!)
3. enuii said...
A distinctly flawed article that takes no account of the huge numbers of 1/2 bed apartments that are springing up like cancer on every spare scrap of urban land. It also makes no allowances for the vast number of buy-to-let properties that many people currently live in and given a more sane housing market could quite easily afford to buy should they so desireth. There are plenty of properties in this country already, the country is not awash with homeless graduates and many choose to stay at home (especially the male of the species) with no bills, decent meals, laundry service, plenty of spending money for the weekend and a decent car to drive. This whole undersupply nonsense that may possibly only apply to the SE of England just doesn't work elsewhere and is a myth spread to prop up an already overinflated market that everyone at the back of their mind knows will eventually collapse.
4. Ticktock said...
Sorry disagree with the concept of a cartel: absolutely not applicable to the house market.
Cartels need two things to exist:
1. coordination among members
2. clearly enforceable penalties in case of breach
you don't think that these things exist? Really?
The Coordination among members (ie. banks) certainly does, and I would have thought the threat of International 'Capital flight' , & the resulting 'currency crisis' (which is clearly political, and clearly well coordinated when ' Governments' don't do what they are told
5. rich said...
@Ticktock, confused76
It all depends on whether you see the banks or the homeowners as the cartel. The article talked about cartels in the context of banks and the planning system. Of course, the involvement of land banks and planning regulations is in my opinion a very good thing. Prices would be pushed up regardless (since the effective demand is pushed up by financial conditions rather than by the natural rate of demand caused by people needing somewhere to live), but without them we'd have paved the entire country with monolithic housing estates.