Saturday, May 17, 2008
Housing shortage? What housing shortage?
FT: Merryn Somerset Webb: It’s common sense that is in short supply
"But the best bit of all is the way this seemingly sudden surplus of new houses – houses no one wants to buy – throws light on the nonsense that has been used to rationalise the housing bubble over the past decade."
Merryn shows up our dim politicians.
Posted by letthemfall @ 10:26 AM (1005 views) Add Comment
9 Comments
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1. confused76 said...
good post but needs subscription
could you please cut and paste
2. Alan Lubin said...
try this:
http://www.ft.com/cms/s/0/82801712-236d-11dd-b214-000077b07658,Authorised=true.html?nclick_check=1
3. Jimmyb said...
Yes common sense is in short supply and the man leading the country has none, did he think he could run the economy on the back of the housing market spriralling ever upwards, who on earth did he think was going to pay for it all?
4. letthemfall said...
c76: The housing bit of article follows. You should be able to view the article without a subscription though. But make sure you delete all the FT cookies on your computer: these prevent viewing more than 5 articles.
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Here’s a turn-up for the books: we have such a vast oversupply of houses in the UK that Gordon Brown is proposing to spend £200m to buy up some of the excess.
This is amusing in many ways. There is a nice irony in seeing the government, whose tax and easy money policies drove the buy-to-let bubble, backed into becoming a buy-to-let investor itself just as everyone else rushes for the exit.
There is also the absurdity of Brown suggesting that his £200m can help the housing market or that it would be a good thing if it did: there surely aren’t many left who think that endlessly rising house prices are a good thing. Then there is Brown’s other idea – that he will push shared ownership, perhaps of these unwanted houses, as a way of helping first-time buyers on to the ladder, just at the very moment that most first-time buyers have realised that the last thing they want is to get on that ladder. Instead, they want to sit back and wait for the market to sort things out for them.
But the best bit of all is the way this seemingly sudden surplus of new houses – houses no one wants to buy – throws light on the nonsense that has been used to rationalise the housing bubble over the past decade. The argument, spouted by everyone, from the founders of now bankrupt buy-to-let “investment” club Inside Track, to the strategists of supposedly respectable international banks went like this: the UK is a small island; there aren’t enough houses on it for our growing population; this shortage of supply means house prices will go up for ever.
So much for that – even our housing minister thinks prices are going to fall 5-10 per cent at best. As it turns out, there are plenty of houses. Some 163,900 houses were completed in 2006 and another 174,900 in 2007 – assume three people per household and that puts a new roof over the heads of not far off one sixtieth of the population. The thing in short supply was never houses. No, it was common sense.
5. stillthinking said...
Google for the title of the article and then go for the cached page on the search results normally works for me.
6. voiceofreason said...
Nice post, thanks lettthemfall
7. denzil said...
The thing to remember about the ebb and flow of supply & demand is that unless the supply is providing goods that are desireable to purchase then using the supply & demand argument is pointless. If I produced 1 million cheap cars that people simply didn't want to buy then its not going to make cars cheaper is it! The impact is negligable.
8. japanese uncle said...
A few years ago, only a few brave analysts were predicting oil above $50. Now to be taken seriously in analyst land you've got to be forecasting $200
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FYI the Nikkei Index reached 38,915 on 29/Dec/1989 at which point in time, 90% of the economists in Japan were predicting 40,000 or above in early part of 1990, while some even predicted 100,000 in the not so distant future. As everyone knows now, the same index was less than 20,000 as at 1/Oct/90. Nowadays it hovers around 12,000-13,000. Reading history is a must.
9. Bangybongo said...
the big western central banks are still hurtling toward the big question: how to deal stagflation (shrinking economy, rising prices caused by asia getting more muscle). they're barely getting away with it now. when the question becomes red hot, we'll know the end game: either deflation caused by eye-watering interest rates that destroy growth, or roaring inflation caused be rates that are too low. they are treading a fine line, but the question won't just go away conveniently. china's breakneck growth also poses a question: jack up rates to about 10-15% to maintain stable prices and social harmony (but seriously denting the global growth ``story''), or let 'er rip. we are all about to live in interesting times, whatever decisions they all take.