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Housing Market Obsession Grips Capitals Anew

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I just got back to the US after two weeks in London, where the property bubble is so hysterical, so much worse than New York's, that people talk about neighbourhoods falling like bits of France in the war. Clapton's gone; King's Cross has gone – even that nasty bit of the Caledonian Road where people used to totter about at 9am sipping White Lightning.

Tottenham (rebranded "South Tottenham"), which just got a Waitrose supermarket, might be reaching a tipping-point. Or it might take another 10 years – who knows in this climate, where anything over one bedroom and under £500,000 is presented as an eye-popping bargain?

It is gross, and it is all-consuming and it is – we are led to believe – driven in part by money flowing into London as a haven from shakier European capitals and by money from Asia. A real estate agent from Winkworth, which has opened a Mandarin language desk (headed up by the brilliantly named Ice Wang, who should moonlight as a superhero), told me he'd just sold a one-bedroom apartment in Chiswick, west London to a 22-year-old Chinese student for £350,000, cash. The homepage of the agency's China desk, meanwhile, advertises a nice terrace house for £22m.

Property acquisition has always traded on fear. Fear that you will miss the boat; that a comfortable old age depends on you owning your own home. For years, my mortgage adviser tried to spook me into buying insurance for my modestly mortgaged one-bedroom flat with various euphemistic scenarios, all of which I resisted until, during our third annual mortgage review, he cracked and blurted out:

What if you get cancer?!

The what-ifs, for some reason, always fall on one side of the fence. "What if the bubble bursts?" seems, even though it burst so recently and spectacularly, to have faded as a fear.

Wow someone in the press writing that house prices are pretty gross! Her BTL colleagues must be fuming!

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I wonder if Winkworth stopped to ask how a 22 year old student from a developing country where corruption is rife got £350,000 in cash. No money laundering checks any longer, it seems.

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There is clearly a big change in narrative occurring - fuelled, no doubt, by young journalists working for little perceived material reward (paying either 80% of income on debt for a box or contributing to some boomer's pension). The public comments on these articles are overwhelming negative on HPI now.

Estate agents have really shot themselves in the foot by putting prices up 20% because they finally had a couple of punters through the door last month.

HTB2 is looking poisonous for year before an election - wager that gets tar-pitted in some working committee to work the detail out.

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Good comment under that article... HPCer?! :)


12 September 2013 6:32pm



The idea that everyone should want to be on the house market is based on the assumption that the value of housing will generally rise faster than inflation / wages: otherwise investing money in housing is less profitable than putting that money in a bank account or shares.

But let's think about what that means: say property prices go up by 10% above inflation. If I own a £100,000 house, I make £10,000 and I pat myself on the back. But someone who owns a buy to let empire of £1m, makes £100,000 and the sheikh who own £10m of flats in london makes a million. The problem with building an economy around housing instead of jobs is that one person can only work one job, but can own lots of property. And in fact, if I don't own any property, rising property prices make me poorer because all that extra wealth drives up the cost of living.

And isn't it basically so undeniable as to be tautology, that when property prices rise faster than inflation or wages, the haves get richer in comparison to the have nots? Even those of us who own houses, need to stop seeing rising house prices as good news, because rising house prices are one of the biggest drivers of inequality. The fact is that the market has failed. A properly functioning market increases supply to meet increasing demand, but the housing market does the opposite. Once again we are asking the state to pick up the pieces for the failure of the private sector, and going to the government and demanding they build more affordable housing. But how can we seriously expect the ruling class of this country (who own most of the land and property) to support a mass house building programme, when such a programme would cause the value of their assets to fall?

What is needed instead is to change the fundamental economic conditions governing land and property. Despite soaring rents and house prices, we all every day, walk past abandoned homes in great locations, abandoned petrol forecourts that never get developed, great brownfield sites that go underdeveloped because they are owned by supermarkets and landbanks who never develop them because they just want to stop a rival from making use of them, or because they would rather have a piece of land as asset making them money, than make a large payoff for developing it and selling it off.

All these things happen because fundamentally, land costs nothing to keep once you own it outright, and without ongoing costs, there is no opportunity cost to wasting land.

That's what needs to be changed: we need to shift the burden of taxation away from wages and onto property ownership. The mansion tax and 10p tax rate is a great start by milliband, but we need to do more. We should allow councils to charge higher rates of council tax to vacant properties and undeveloped land. Suddenly their owners will find themselves running at a loss and be forced to either make use of them or sell them on to those that will.

But we need to go further. We should extend these policies into a national Land Value Tax on all land and properties, and use the proceeds to fund cuts to VAT and more importantly, an end to all income taxation for those on the minimum wage. These policies will restore demand to the economy, build more houses, and lower rents in the long term.

Not only do I believe that these measures will fix the British economy, I believe that there will be no long term recovery until they are implemented.

Thankyou for reading this. You can learn more about land value tax here

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  • 404 Brexit, House prices and Summer 2020

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