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bmf

Cost Of New Builds

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Hi

article on the cost of new build http://www.bbc.co.uk/news/business-14410589.

This ties in with something I was thinking yesterday. I'm not sure what the conclusion is but these are an outline of my thoughts:

40 or so years ago:

- house prices used to be 3 times wages

- this was because houses could be built for less than 3 times wages

- costs were: cost of the land, materials and labour

- banks would not lend greater than 3 time multiple. period

- planning laws more relaxed

Fast forward to today:

- house prices are 8 or more times wages in the SE

- costs remain broadly the same: land, materials, labour plus now a large planning bung to the council

- banks will lend greater than 3 times multiple. Salaried can get 5 times, liar loans were even more

- planning laws strict. Brownfield

So, to my mind two variables have changed:

- lending

- planning

Planning is restricting supply artificially and this is then creating an auction situation for housing. When supply is restricted people move from paying how much a house is worth (ie costs to build) to how much they can pay for it. Enter lending, which allowed people to up the amount the could possibly afford.

Productivity has gone up since 1970. We now have to work an hour or two to pay for our food for the day. We have to work for less time to cover the basics. Instead of this additional time being offered as a choice to citizens to either work a few hours to cover the basics or longer if they want a car, travel etc, this excess productivity is being mopped up by housing.

If a house could be bought for 3 years work in 1970 it should be available now for 2 years work. At the most 3 years work.

Affordable housing is the missing link in the life of leisure dream. If I could buy a house and then pay it off in a few years I'd be able to work 3 days a week and easily pay for my 2 kids.

By restricting housing the government are denying us the right to a much nicer life. Of course in doing this I have to work hard and generate lots of taxes, so I know why they are doing it. We have to get away from the constriction of supply, because an auction scenario will inevitably lead to prices many times higher than the true cost of production.

Sorry if that was a bit long. Probably the idea could be condensed but it's an important one.

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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