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Demand Increases Are Rapidly Transmitted Into Rising Prices Rather Than Expanded Output

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http://blogs.lse.ac.uk/politicsandpolicy/archives/35734?utm_content=buffer70693&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer

I know of no one beyond the government and industry representatives who thinks Help to Buy II is a good idea. All informed commentators – both domestic and international – see it as bad policy. It is likely to distort the market significantly. Even Vince Cable has tried to distance himself from his own government’s policy. But then he is one of the few people at the heart of government who actually has an economics background.

Actually I think no political party wants a rational housing market that responds to demand, and prefers to manipulate it cynically for political gain.

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People get the govt they deserve, and as they say, good politics tends to make for bad economics.

A friend has recently bought a starter home, and already you can see the dollar signs in her eyes, regaling the various express stories of PRICES TO ROCKET as if they are a good thing. Obviously the fact that if she ever wants to move up from her ~500sq ft starter home and have a family, this means even if her house goes up £20k, the next step up the ladder will likely be £40k more...the only people to benefit from this type of policy are the 1% of the population who own more than one home.

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Actually I think no political party wants a rational housing market that responds to demand, and prefers to manipulate it cynically for political gain.

You don't win elections by making people "poor". Unfortunately there are lots of people who believe they are very wealthy because of the value of their house. The problem is they are only wealthy if they sell and have the cash, this point is lost on them as their house is worth £500k, therefore they are rich the idea that perhaps they would be even richer if they invested in the productive economy is lost on them.

Euphoric glasses see the world entirely differently.

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Just searching the #HelpToBuy tag on Twitter for giggles and get some ramping gems like this!

This 3 bed family home in Mill Green priced from just £229,950. Move in with as little as 4% deposit with
@smilnehomes :blink:
Why are the media not rejoicing about the 15,000 full time jobs that the 10,000 #helptobuy loans are delivering in the building industry?
@markoliver_ :lol:
RT @: 10,000 Queue Up For Help To Buy
Our #conveyancing solicitors are set to get even busier when the Help To Buy scheme is extended
Edited by aSecureTenant

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This guy really does seemed to understand how things work. 1) It is not a supply problem per se and boosting supply in a haphazard manner may make things worse. 2)That intervention in the form of planned development on a large scale i.e. the new town model may be the answer and avoid the slaveboxes that we get at the moment.

Equally importantly, the planning system is only one part of the housing supply system. It needs to be understood in relation to the operation of developers and the house building industry, the land market, and the way in which development is financed. Clearly, there is a complex interaction between these components. It can be argued that the recognised problem of land speculation by developers, for example, is a response to the vagaries of the planning system. That would imply that land release would not be a problem in the absence of planning. But that makes some strong assumptions about the behaviour of landowners. Experience prior to the arrival of our current planning system suggests that, in the presence of increasing demand and growing cities, land speculation would not disappear.

In addition, the housebuilding industry in the UK has a higher level of industrial concentration than most other developed countries, and concentration has increased over the last decade. The industry also has a distinctive subcontracting structure that delivers flexibility but not necessarily quality. The small-scale builder and self-build sectors are small: these sectors account for a more substantial proportion of output in other countries. The Coalition has made modest attempts to stimulate this sector of the industry, but it faces significant barriers.

Finally, the interaction between the planning system, high prices, volume building to standardized templates, and the absence of minimum space standards can conspire to means that when new construction does occur it is not always viewed as a positive and high quality addition to a neighbourhood. That, of course, folds back into the concerns of local residents about further development.

One of the solutions to this problem could be, perhaps counterintuitively, for new build to occur on larger scales. That would allow developments to be appropriately masterplanned – with sufficient allowance for public spaces and amenities – so that sympathetic, well-designed and high-quality construction can allay residents’ fears about allowing new development locally.

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You don't win elections by making people "poor". Unfortunately there are lots of people who believe they are very wealthy because of the value of their house. The problem is they are only wealthy if they sell and have the cash, this point is lost on them as their house is worth £500k, therefore they are rich the idea that perhaps they would be even richer if they invested in the productive economy is lost on them.

Euphoric glasses see the world entirely differently.

You miss an important point. They aren't wealthy. Their wealth tied up in their house is only enough to buy that house, as it was before.

What has happened is that the inflationary effect of high property costs has become a drag on the economy, and the so value of money has fallen. This will become appaent to them when they try to use their savings or pensions in due course, but people won't generally put 2 + 2 together and work out why.

As for the thread title, "Editing a post in Demand Increases Are Rapidly Transmitted Into Rising Prices Rather Than Expanded Output", this is to expected in most markets; production cannot usually be turned on like a tap. Only after prices have risen is there a greater incentive to raise production, particularly if investment is required to do so.

Inflation is a tax on cash, pensions and savings.

Edited by happy_renting

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http://www.cityam.co...ial-land-prices

Land per se is plentiful and cheap: in Oxford, a hectare of agricultural land with no planning permission is worth £20,000. The same space is worth £1m with industrial planning permission and £4m with residential planning permission. The scarcity is entirely man-made and political in nature.

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The curse of NIMBYs. The landowner near me was willing to sell to a social housing developer for a price of around £5-10k a plot. (large plots -big semis with gardens front and rear and garaging to the side) The council wanted it to go ahead, but then the NIMBYs, supported by the local press, show up and stop it in its tracks.

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The curse of NIMBYs. The landowner near me was willing to sell to a social housing developer for a price of around £5-10k a plot. (large plots -big semis with gardens front and rear and garaging to the side) The council wanted it to go ahead, but then the NIMBYs, supported by the local press, show up and stop it in its tracks.

Council/gov/whatever should be able to just buy a field for £2k and acre (or whatever) give themselves planning permission and tell the NIMBY's to f*!* off!

And this is what happened, and how "new" towns like Northampton, MK, Peterborough expanded.

Edited by aSecureTenant

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