The Answer Is Not To Build More Homes.

[Bruce Banner]

The answer to the current housing bubble is not to build more homes, as those with a vested interest in rising house prices keep telling us.

The answer it is to remove the government stimulus and let prices correct naturally!

[R K]

The answer to the current housing bubble is not to build more homes, as those with a vested interest in rising house prices keep telling us.

The answer it is to remove the government stimulus and let prices correct naturally!

With household formation running at c 250,000 p.a. and housbuilding about 1/2 that over the last 5 years, where would you suggest these new households live?

Why will prices correct if you have a massive excess of demand over supply?

Why are you against building enough new homes to meet demand?

Edited June 3, 2014 by R K

[Bruce Banner]

With household formation running at c 250,000 p.a. and housbuilding about 1/2 that over the last 5 years, where would you suggest these new households live?

Why will prices correct if you have a massive excess of demand over supply?

Why are you against building enough new homes to meet demand?

I'm not against building new houses to meet demand.

[fluffy666]

With household formation running at c 250,000 p.a. and housbuilding about 1/2 that over the last 5 years, where would you suggest these new households live?

Why will prices correct if you have a massive excess of demand over supply?

Why are you against building enough new homes to meet demand?

And to add: Why did prices fall in the US, Ireland, and Spain, but NOT in the UK (much) even with an economic meltdown?

[Bruce Banner]

And to add: Why did prices fall in the US, Ireland, and Spain, but NOT in the UK (much) even with an economic meltdown?

Bank bailouts, funding for lending, help to buy underpinning buy to let.

[Bloo Loo]

Bank bailouts, funding for lending, help to buy underpinning buy to let.

too verbose...Bank Bailouts would suffice.

These are expensive and ongoing.

[R K]

I'm not against building new houses to meet demand.

Your OP said the answer isn't to build more homes.

The demand is 250,000 p.a. Clearly if you run a policy of building 1/2 that for a prolonged period - supply has actually been running well below household formation for best part of 40 years, then you're going to end up with rising prices for 40 years, way before any short-run policies such as HTB. I agree HTB is designed to underpin house prices but that's a distraction. It's not the fundamental issue.

Anyway good to see you've changed your mind and you're actually in favour of building new houses to meet demand, which means c. 300,000 p.a. - double the current rate - for maybe a decade or so.

[crashmonitor]

With household formation running at c 250,000 p.a. and housbuilding about 1/2 that over the last 5 years, where would you suggest these new households live?

Why will prices correct if you have a massive excess of demand over supply?

Why are you against building enough new homes to meet demand?

I reckon the covert economic plan is to make property scarce, it keeps bank loans in the black and keeps the economic miracle on track. Spain, france and Ireland shows what you get with unlimited building land.

Edit. from my own perspective the resulting cheaper homes and general deflation would be nice though.

Edited June 3, 2014 by crashmonitor

[Bruce Banner]

Your OP said the answer isn't to build more homes.

The demand is 250,000 p.a. Clearly if you run a policy of building 1/2 that for a prolonged period - supply has actually been running well below household formation for best part of 40 years, then you're going to end up with rising prices for 40 years, way before any short-run policies such as HTB. I agree HTB is designed to underpin house prices but that's a distraction. It's not the fundamental issue.

Anyway good to see you've changed your mind and you're actually in favour of building new houses to meet demand, which means c. 300,000 p.a. - double the current rate - for maybe a decade or so.

I haven't changed my mind at all.

[goldbug9999]

The answer to the current housing bubble is not to build more homes, as those with a vested interest in rising house prices keep telling us.

The answer it is to remove the government stimulus and let prices correct naturally!

Your understanding of economics is flawed.

Prices only get bid up by excess money where unit demand outstrips unit supply. In circumstances where unit supply exceeds unit demand than all sold units have to compete with the unsold units which sets a stable price floor irrespective of how much money people have to spend.

Your partially correct in the sense that increasing unit supply has little effect util such time as it exceeds unit demand, beyond that point however it will have a massive effect.

Edited June 3, 2014 by goldbug9999

[@contradevian]

With household formation running at c 250,000 p.a. and housbuilding about 1/2 that over the last 5 years, where would you suggest these new households live?

Why will prices correct if you have a massive excess of demand over supply?

Why are you against building enough new homes to meet demand?

From todays Monbiot article. UK's housing problem is more of distribution than demand. Not suggesting their shouldn't be a lot more building though.

Now Danny Dorling reveals that "the supply of dwellings and especially rooms per person has never been higher". What we are faced with, he says, is not a crisis of supply but a crisis of distribution. In England and Wales there are 55 million people and 66m bedrooms: if no one shared a room there would still be more than enough.

Even in London there are more bedrooms than people: a greater supply of housing per head than there has ever been. But because inequality has been expanding even faster than extensions and conversions, most of this abundance of space is in the hands of the people who need it least. A well-aimed tax would help to match housing to need – and would doubtless prompt a major reassessment of how much new building is really required.

Edited June 3, 2014 by aSecureTenant

[evetsm]

Artificial demand stimulus, causing misallocation of supply, causing jobs to be lost outside of the financialization industries centred in London , causing massive oversupply of empty houses outside London ,also causing BTL boom where single owners soak up supply by owning multiple properties, as well as absentee investors parking money in property because financialization has killed other opportunities for earning returns.

This is a classic Austrian Businesses cycle misallocation boom caused by mispricing(rigging) of rates, making it APPEAR to be a supply problem. To be followed by a humongeous bust.

[Bruce Banner]

From todays Monbiot article. UK's housing problem is more of distribution than demand. Not suggesting their shouldn't be a lot more building though.

Nor am I.

[crashmonitor]

From todays Monbiot article. UK's housing problem is more of distribution than demand. Not suggesting their shouldn't be a lot more building though.

A sensible rate of interest on savings might actually prevent all this property hoarding and under utilisation of existing stock. But we have political parties whose whole philosophy on life is bases around property.

[Bruce Banner]

Artificial demand stimulus, causing misallocation of supply, causing jobs to be lost outside of the financialization industries centred in London , causing massive oversupply of empty houses outside London ,also causing BTL boom where single owners soak up supply by owning multiple properties, as well as absentee investors parking money in property because financialization has killed other opportunities for earning returns.

This is a classic Austrian Businesses cycle misallocation boom caused by mispricing(rigging) of rates, making it APPEAR to be a supply problem. To be followed by a humongeous bust.

Yes.

[evetsm]

From todays Monbiot article. UK's housing problem is more of distribution than demand. Not suggesting their shouldn't be a lot more building though.

This is spot on. imo.

It is a distribution problem caused by rigging the demand

[Bruce Banner]

This is spot on. imo.

It is a distribution problem caused by rigging the demand

Yes again.

[Bruce Banner]

Your understanding of economics is flawed.

Prices only get bid up by excess money where unit demand outstrips unit supply. In circumstances where unit supply exceeds unit demand than all sold units have to compete with the unsold units which sets a stable price floor irrespective of how much money people have to spend.

Your partially correct in the sense that increasing unit supply has little effect util such time as it exceeds unit demand, beyond that point however it will have a massive effect.

I'm talking about the short to medium term. Obviously if you build as many houses as they did in Spain, a price crash is inevitable.

[rantnrave]

It's interesting to see that now the MSM are acknowledging the existence of a bubble it is portrayed as an inevitable consequence of insufficient housing stock.

The 'answer' IMO is far more complicated. Paving over the SE with three-bed semis priced at £350k each will solve nothing. In a way, the issue of bedrooms vs front doors is salient - there aren't enough properties but there are enough spare rooms. Ironically it is older Boomers (and the generation above them) who are rattling round in empty 4-bed nests that they no longer need who are often the most pro-NIMBY. There is something wrong when those in council houses get taxed for having surplus bedrooms while those who are older and have lots of spare bedrooms get taxpayer help to heat that empty space.

Can someone also clarify if the 250,000 new household figure is net (ie, inclusive of all the households that pass away / emigrate each year etc)?

There's an article on Property Industry Eye about the supposed empty one million properties - I'm having technical details linking to that though (can someone else oblige?)

[R K]

From todays Monbiot article. UK's housing problem is more of distribution than demand. Not suggesting their shouldn't be a lot more building though.

Agree absolutely with inefficient distribution, taxes too low etc etc.

But that ain't gonna change anytime soon. Just look at all the threads today on the horror of even suggesting higher property taxes.

The same people who want lower house prices are vehemently against either raising taxes or building new homes - i.e. they're voting UKIP ffs.

Moreover Dorling's solution is dare I say it a tad utopian in allocating the number of bedrooms to the number of people.

I really don't understand this reluctance to see a combination of more progressive property taxes AND an increase in supply of homes, not just 'bedrooms'. Allocating 'bedrooms' to numbers of people is IDS flagship policy with all the nonsensical social consequences arising therefrom.

But the BIGGER issue is of course that London skews everything in this country. I agree with that 100%. London has the wrong sterling rate and the wrong interest rate relative to the rest of the UK, to satisfy the financial sector, the landowners and the legislature. Until that changes the ONLY solution will be increasing supply. i.e. the polar opposite of this thead's title.

Further, Austrians may pretend they believe it's a misallocation problem but at the same time they rail against any suggestion of bank bail-ins. They may claim they want to see the banks collapse but they also want their own personal savings protected. So I don't really pay much attention to Austrians. It's all theoretical nonsense that they wouldn't support in practice.

Edited June 3, 2014 by R K

[Bruce Banner]

It's interesting to see that now the MSM are acknowledging the existence of a bubble it is portrayed as an inevitable consequence of insufficient housing stock.

The 'answer' IMO is far more complicated. Paving over the SE with three-bed semis priced at £350k each will solve nothing. In a way, the issue of bedrooms vs front doors is salient - there aren't enough properties but there are enough spare rooms. Ironically it is older Boomers (and the generation above them) who are rattling round in empty 4-bed nests that they no longer need who are often the most pro-NIMBY. There is something wrong when those in council houses get taxed for having surplus bedrooms while those who are older and have lots of spare bedrooms get taxpayer help to heat that empty space.

Can someone also clarify if the 250,000 new household figure is net (ie, inclusive of all the households that pass away / emigrate each year etc)?

There's an article on Property Industry Eye about the supposed empty one million properties - I'm having technical details linking to that though (can someone else oblige?)

Try using Google Chrome browser.

http://www.propertyindustryeye.com/1m-homes-empty-population-pressure-grows/

[Killer Bunny]

The answer to the current housing bubble is not to build more homes, as those with a vested interest in rising house prices keep telling us.

The answer it is to remove the government stimulus and let prices correct naturally!

You are quite right. There are 670k empty homes in England alone. It is almost assured many of them will come on market when prices fall sustainably.

#banHTB #letmktsetintrates #bringbackcapitalism

Also, retirees in 4/5 bedders will trade down

Those who say where are the new people going to live - there is your answer

[The Knimbies who say No]

Nationwide "BS" is responsible for an incredible 70% of the net lending in the UK.

If/when they have had enough or hit the skids, as Porky sez:

Edited June 3, 2014 by Joan of The Tower

[Killer Bunny]

And to add: Why did prices fall in the US, Ireland, and Spain, but NOT in the UK (much) even with an economic meltdown?

Prices outside SE carried on falling to 2012.

HTB stopped capitalism doing its thing.

[Killer Bunny]

Your understanding of economics is flawed.

Prices only get bid up by excess money where unit demand outstrips unit supply. In circumstances where unit supply exceeds unit demand than all sold units have to compete with the unsold units which sets a stable price floor irrespective of how much money people have to spend.

Your partially correct in the sense that increasing unit supply has little effect util such time as it exceeds unit demand, beyond that point however it will have a massive effect.

Without lending prices would be plummeting and supply would be soaring