Roger Bootle: Govt Should Let Prices Fall

[Har Fast]

Telegraph Article

Highlights include:

For an individual, the availability of more money may help them to become a property owner, but this is not true for the population as a whole. In the short run at least, the supply of housing is fixed. An increase in mortgage lending will only generate higher house prices.

In fact, lower paid workers have been shut out of the market largely as a result of government policy, which is one of the leading causes of sky-high property prices.

Government has two roles to play. First, planning laws which hold back the development of new housing need to be restructured and relaxed to boost new building. Second, tax laws need to attenuate the artificial inflation of demand for property.

What really matters is not the proportion of people who own their own homes but rather the quantity and quality of available housing.

And he even floats the idea of LVT, but accepts that it ain't going to happen any time soon.

I assume Grant Shapps will read the Telegraph...

[Frank Hovis]

Roger seems to have got his brain back into gear. I read him every day when I worked in the City the 90s and he was usually spot on but he started spouting tripe in the 00s and making daft pronouncements. Time to start reading him again methinks.

[Tired of Waiting]

(...)

Highlights include:

(...)

"If the Government allowed house prices to fall rather than trying to artificially boost demand, it would go a good deal of the way towards helping first-time buyers and other "worthy" groups."

I like him.

[VeryMeanReversion]

>For an individual, the availability of more money may help them to become a property owner, but this is not true for the population as a whole. In the short run at least, the supply of housing is fixed. An increase in mortgage lending will only generate higher house prices.

>In fact, lower paid workers have been shut out of the market largely as a result of government policy, which is one of the leading causes of sky-high property prices.

>Government has two roles to play. First, planning laws which hold back the development of new housing need to be restructured and relaxed to boost new building. Second, tax laws need to attenuate the artificial inflation of demand for property.

>What really matters is not the proportion of people who own their own homes but rather the quantity and quality of available housing.

It's as true today as it was 10 years ago. Yet nothing happened to correct it and I expect nothing new will.

[mattyfc]

Telegraph Article

Highlights include:

And he even floats the idea of LVT, but accepts that it ain't going to happen any time soon.

I assume Grant Shapps will read the Telegraph...

The government has no choice of course. Prices will fall as interest rates rise and tight lending is maintained. The lending that caused current prices was unsustainable and if tried again would lead to another bust, prices falling rapidly. There is no choice long term the market will correct back to the long term average and probably below it.

Seems the tide is turning. The huge problems of HPI, Credit, Debt Bubbles are being recognised even by the home owning middle classes.

The "miracle" economy being exposed for the house of cards it was.

[GordonBrownSpentMyFuture]

The government has no choice of course. Prices will fall as interest rates rise and tight lending is maintained. The lending that caused current prices was unsustainable and if tried again would lead to another bust, prices falling rapidly. There is no choice long term the market will correct back to the long term average and probably below it.

Seems the tide is turning. The huge problems of HPI, Credit, Debt Bubbles are being recognised even by the home owning middle classes.

The "miracle" economy being exposed for the house of cards it was.

+1

A good article from Bootle. Glad to see such sanity in the MSM at long last.

And while the VIs will trundle out the usual "growing / ageing population" and "small island" mentality there's so much common sense and reasoned conclusion in his argument that one would look foolish to refute it.

[tricksters]

The government has no choice of course. Prices will fall as interest rates rise and tight lending is maintained. The lending that caused current prices was unsustainable and if tried again would lead to another bust, prices falling rapidly. There is no choice long term the market will correct back to the long term average and probably below it.

Seems the tide is turning. The huge problems of HPI, Credit, Debt Bubbles are being recognised even by the home owning middle classes.

The "miracle" economy being exposed for the house of cards it was.

Most homeowners I know say their mortgages are peanuts. Interest rates aren't going up enough any time soon to make any difference to that. Plus, the government clearly have a vested interest in continuing to keep houses expensive - all the decision makers almost certainly own multiple homes themselves. They aren't going to shoot themselves in the foot financially by letting the market correct - they have kept this ball rolling throughout and will continue to do so. Just as you think, right that's it, houses must start to crash now, they pull another rabbit out of the bag. They are devious and dishonest. There's probably a lot of rabbits to pull out of the hat yet.

[fellow]

I hope Grant Shapps reads this article before his meeting with the VIs to 'help' FTBs on 15th Feb.

Tell him what you think here. http://www.shapps.com/2011/01/welcome-to-the-new-shapps-com/#comment-152

[OnlyMe]

Money for nothing.

China ended up with the money, we got nothing but a bubble.

[The Knimbies who say No]

I'd beware of Mr Bootle to be honest, although he recognises the problem, his answer is that we can be taxed into a solution. Plank.

[Tired of Waiting]

I hope Grant Shapps reads this article before his meeting with the VIs to 'help' FTBs on 15th Feb.

Tell him what you think here. http://www.shapps.com/2011/01/welcome-to-the-new-shapps-com/#comment-152

+ 1

Perhaps a few of us could include a link to Bootle's Telegraph article in our comments on Shapps site?

http://www.telegraph.co.uk/finance/comment/rogerbootle/8306972/Why-must-we-make-the-same-old-policy-failures-in-the-housing-market.html

[Tired of Waiting]

(...) sanity (...)

That has been the scariest thing in the past decade: a whole nation going completely bonkers, and for so many years, collectively!

It has been deeply disturbing. Still is.

Other nations have gone bonkers before, for a period, but I had never imagined that it could happen to Britain. Not "en masse" like that. And not so totally self-inflicted, and to such a disastrous degree - yes, coz we ain't seen the half of it yet, in many areas, and not only in housing, and not only in economic terms. We'll have social, political, and demographic problems out of this too, for at least a decade. And consequently lots of individual emotional problems, of course. A totally self-inflicted national tragedy.

IMPO the British media has a lot to answer for, for not warning the population of the obvious mounting dangers - particularly the BBC, that has "independence" and a duty of objectivity.

Edited February 7, 2011 by Tired of Waiting

[Tired of Waiting]

I already had.

Excellent.

[Riedquat]

Most homeowners I know say their mortgages are peanuts. Interest rates aren't going up enough any time soon to make any difference to that.

Are they the ones that bought before prices went nuts?

I'll also stick to my point that planning, and hence building levels, was only ever a minor contributor at best, and tackling population increase is a better solution than relaxing planning (although I'll accept some relaxation might be required to adequately house the current population, but let's keep the long view in sight).

[Timm]

From reports filtering through of what Shapps said on Radio 4 today, he is beginning to get it.

Or is now able to start saying it...

(Sorry about the duplicate thread BTW).