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Eddie_George

No, the housing crisis will not be solved by building more homes

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Lending to business supports capital investment and wages, fuelling growth, but lending on existing property and land is by comparison unproductive. Land is unusual in economic terms, in that it exists in fixed quantity; increased lending against it serves therefore only to drive up its value. And the banking sector's health has become dangerously intertwined with property prices.

https://ftalphaville.ft.com/2018/10/15/1539577800000/No--the-housing-crisis-will-not-be-solved-by-building-more-homes/

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Edited by Eddie_George

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Land is unusual in economic terms, in that it exists in fixed quantity; increased lending against it serves therefore only to drive up its value

In cities most land is built on anyhow, but constructing high rises is essentially creating land within the city.

Also in the UK it's really land that has planning in the case of property.

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22 minutes ago, Eddie_George said:

Land is unusual in economic terms, in that it exists in fixed quantity; increased lending against it serves therefore only to drive up its value

Amazing that an institution which labels itself as the "Financial Times" would publish such a trivially wrong statement.

Quote

Ryan-Collins also argues that central banks need to guide credit away from property and into productive areas of the economy

Rank Keynesianism. 

Quote

In short, the ‘housing crisis’ needs to be understood primarily as a product of the banking system, not a function of construction volumes - it represents a market failure, not a supply/demand imbalance.

So close, yet so, so far. The market has not failed. The market has responded to gross financial distortions implemented by States using massive violence.

That is almost the polar opposite of Capitalism

 

Sad that a once-respectable publication has become a crony Socialist rag.

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Building loads of new homes will solve nothing as long as mass immigration is allowed to continue.

Supply and demand is the oldest economic law in the universe.  

Whilst I do feel sorry for many who want to buy a home and is unable to, I have no sympathy for those who support the EU and who want refugees to come here.  

If they are so stupid that they cannot understand the simple law of supply and demand which was transparently obvious to me when I was told about it as a 13 year old doing economics that is their problem. 

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6 minutes ago, happyguy said:

Supply and demand is the oldest economic law in the universe.

Yes, and credit has its own supply and demand, of which interest rates are a very important measure.

Mass immigration is certainly a factor, but it pales into insignificance compared to government-enforced credit creation.

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1 hour ago, Locke said:

Yes, and credit has its own supply and demand, of which interest rates are a very important measure.

Mass immigration is certainly a factor, but it pales into insignificance compared to government-enforced credit creation.

It's a deliberate policy of HPI, and it needs several legs to stand on.  One of them is demand, i.e immigration.

Another one is the lending policy as you say.  Also benefits etc.

A truly sustainable HPI, such as we have seen, requires all its legs to stand on.  Take one away and it is finished.

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2 hours ago, Locke said:

Yes, and credit has its own supply and demand, of which interest rates are a very important measure.

Mass immigration is certainly a factor, but it pales into insignificance compared to government-enforced credit creation.

See Australia, Canada (Hiya Carney), America, NZ, Republic of Ireland, Spain etc etc for other bubbles which essentially have feck all to do with lack of house-building or immigration.

I am so sick of hearing those BTL estate agent crocodile tear excuses it almost physically puts me off listening/reading debate in the MSM. Appreciate it might take time for public opinion to develop though.

Oh yeah that and the perennial  oh so clever new-fangled micro-home touted as the 'solution'  when actually its a symptom or even part of the problem.

 

 

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Building more housing is useless if the people who most need it are priced out of renting or buying it......buying developing land and building on land relies on money making, nobody would bother building if they didn't think there was a profit in it......the profit is selling or renting to those that are able to rent or buy......the people who have a job that pays enough for them to rent or buy with a mortgage......can build all you want but no job or no money it will stay empty costing money, costing even more if values are depreciating......land banking.

So what we then have is more sharing, less space, lower living standards, poorer people living in a poorer country...... children with fewer opportunities to reach their maximum potential the same opportunities their parents and grandparents had.......but todaus children still have a better standard of living than their great or great great grandparents had.......sliding down the bell curve.😉

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15 hours ago, kzb said:

It's a deliberate policy of HPI, and it needs several legs to stand on.  One of them is demand, i.e immigration.

Another one is the lending policy as you say.  Also benefits etc.

A truly sustainable HPI, such as we have seen, requires all its legs to stand on.  Take one away and it is finished.

Bubbles do not require any "real" factors in order to come into existence.

Things like immigration and benefits, while having a material effect on the prices, are much more important in how they shape investor perception, than in the actual effect they have, which is small compared to the market.

If immigration and benefits remained constant, but enough people lost faith that house prices always increase (say the interest rate rises, or lots of new builds get condemned, or whatever) the prices would collapse regardless those factors.

 

Price is utterly subjective. You can scream into the wind all you want about people paying too much for housing, but if the crowd is pricing them, you will lose.

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14 hours ago, pig said:

oh so clever new-fangled micro-home touted as the 'solution' 

It could be, if the idea that there is now an oversupply of housing percolates through the public consciousness.

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Very interesting. A key failing of neoclassical economics going back to the physiocrats is the conflation of land and capital (admittedly, this wasn't obviously an error in pre-industrial France). Once you've accomplished that trick you can make land disappear altogether from your economic calculations, which means its central role in the industrial economy re. production and distribution is absent and overlooked. Addressing that failure with a land value tax is certainly something I approve of. However, an LVT would take years to work, time we simply don't have given the scale of housing shortages locally in London and the South East brought about by two decades of uncontrolled mass immigration. As a matter of urgency, a program of general needs social housing is also required.

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18 hours ago, happyguy said:

Building loads of new homes will solve nothing as long as mass immigration is allowed to continue.

Supply and demand is the oldest economic law in the universe.  

Whilst I do feel sorry for many who want to buy a home and is unable to, I have no sympathy for those who support the EU and who want refugees to come here.  

If they are so stupid that they cannot understand the simple law of supply and demand which was transparently obvious to me when I was told about it as a 13 year old doing economics that is their problem. 

Man oh man. What can I say about what you've written.... you wear your heart on your sleeve, no matter how misplaced it is.

Mass immigration and refugees have been a thing in the UK for centuries.... and guess what... these folk have very little to do with the housing 'crisis'.

And you were doing post-doc economic research at 13? Yet you call the other team 'stupid'

Perhaps use your economic prowess and turn the ire to Westminster, the banks and your fellow countrymen raking it in?

You should change your name to unhappyguy... or unenlightenedguy

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17 minutes ago, zugzwang said:

Very interesting. A key failing of neoclassical economics going back to the physiocrats is the conflation of land and capital (admittedly, this wasn't obviously an error in pre-industrial France). Once you've accomplished that trick you can make land disappear altogether from your economic calculations, which means its central role in the industrial economy re. production and distribution is absent and overlooked. Addressing that failure with a land value tax is certainly something I approve of. However, an LVT would take years to work, time we simply don't have given the scale of housing shortages locally in London and the South East brought about by two decades of uncontrolled mass immigration. As a matter of urgency, a program of general needs social housing is also required.

It didn't have to have been uncontrolled, it was a controlled choice.......both large numbers of asylum seekers and people moving to earn money at a brilliant rate of exchange to save, to send home to build or buy their own home......living like students in HMO style property, more people in less space.......no extra housing, just the same housing housing more people.....what was not dealt with correctly a) building enough affordable homes for people that have lived here all their lives, their parents, grandparents lived and worked, fought, built the quality homes, transport systems, infrastructure we all live and use today, the hard working people, where this is their only home and always will be......many were gifted out to those seen as to be in greatest need the refugees and asylum seekers, no replacements. b) encouraging more people without the investment in all the resources people in a first world country will have been used to having access to will only see the poorest in a wealthy country feel unvalued, used, and forgotten........great, encourage immigration but if you encourage it have to provide for it and the rest of the population........much money has been made from high immigration, not everyone has benefited from it or feel like they have benefited from it.

We will still have immigration, but a different type of immigration......rich, skilled and educated immigration, some people will still be in competition with the quality jobs and quality housing in quality areas......no change, a different change.😉

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16 hours ago, pig said:

See Australia, Canada (Hiya Carney), America, NZ, Republic of Ireland, Spain etc etc for other bubbles which essentially have feck all to do with lack of house-building or immigration.

I am so sick of hearing those BTL estate agent crocodile tear excuses it almost physically puts me off listening/reading debate in the MSM. Appreciate it might take time for public opinion to develop though.

Oh yeah that and the perennial  oh so clever new-fangled micro-home touted as the 'solution'  when actually its a symptom or even part of the problem.

 

 

In Spain the house bubble created mass housing building which caused prices to crash by a lot.

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19 hours ago, happyguy said:

Building loads of new homes will solve nothing as long as mass immigration is allowed to continue.

Supply and demand is the oldest economic law in the universe.  

Whilst I do feel sorry for many who want to buy a home and is unable to, I have no sympathy for those who support the EU and who want refugees to come here.  

If they are so stupid that they cannot understand the simple law of supply and demand which was transparently obvious to me when I was told about it as a 13 year old doing economics that is their problem. 

Obviously you didn't read the article. The article makes very clear that prices are driven by the amount of lending that is done against property. Being a largely fixed supply, additional lending increases prices.

The article observes that a generation ago lending against retail property made up 25% of the bankingredients system's  lending today it makes up 75%. It has trebled. 

And what has happened to house prices vs wages over the same period? Also approximately trebled.

Yes, physical demand from immigration may make some localised differences, but I  think this gets more reflected in rents rather than house prices. 

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20 hours ago, Locke said:

So close, yet so, so far. The market has not failed. The market has responded to gross financial distortions implemented by States using massive violence.

That is almost the polar opposite of Capitalism

 

Sad that a once-respectable publication has become a crony Socialist rag.

Agree with you on all that. A central bank manipulating the price of money, government central planning and restricting land use have nothing to do with capitalism and are socialist ideas.

I here people who call themselves capitalists and mock the old USSR for fixing the price of wheat yet seem happy that we have a system, that fixes the price of money and inflates asset prices.

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3 hours ago, Locke said:

Bubbles do not require any "real" factors in order to come into existence.

Things like immigration and benefits, while having a material effect on the prices, are much more important in how they shape investor perception, than in the actual effect they have, which is small compared to the market.

If immigration and benefits remained constant, but enough people lost faith that house prices always increase (say the interest rate rises, or lots of new builds get condemned, or whatever) the prices would collapse regardless those factors.

 

Price is utterly subjective. You can scream into the wind all you want about people paying too much for housing, but if the crowd is pricing them, you will lose.

I agree up to a point and  there have been previous Bubbles.  But this time it is different, because all previous bubbles burst quite quickly.

This time it is more like the expansion of the universe, it is going on forever.  One of the reasons is because they have had the demand to sustain it.

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20 hours ago, happyguy said:

Building loads of new homes will solve nothing as long as mass immigration is allowed to continue.

Supply and demand is the oldest economic law in the universe.  

Whilst I do feel sorry for many who want to buy a home and is unable to, I have no sympathy for those who support the EU and who want refugees to come here.  

If they are so stupid that they cannot understand the simple law of supply and demand which was transparently obvious to me when I was told about it as a 13 year old doing economics that is their problem. 

Amen. All the current path is doing is making a more unpleasant country to live in. Some people aren't yet bothered by it, others are, but the only ones to benefit are those able to exploit it and happy in their own pile that they think's safe from the damage they're causing elsewhere.

Unfortunately we probably do need some more building (a necessary evil) but it absolutely has to come hand in hand with tackling population growth, otherwise all you're doing is choosing your path of decline. Still think there are larger problems with housing too. BTL, second homes, ever-expanding commuter belts and centralisation, "HPI is great!" sentiment, they're all significant contributions to the housing crisis that need tackling no matter the number of people to number of houses ratio.

 

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2 hours ago, cashinmattress said:

Mass immigration and refugees have been a thing in the UK for centuries.... and guess what... these folk have very little to do with the housing 'crisis'.

Not in anything like the numbers of the last decade or so (although we've had greater home-grown population growth in the past). There's little to meaningfully compare.

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1 hour ago, iamnumerate said:

In Spain the house bubble created mass housing building which caused prices to crash by a lot.

It may have helped precipitate it, but I think the GFC is what actually caused the crash.

Once the crash is underway, I think the over building of housing will certainly extend the depth to which prices will fall.

1 hour ago, Captain Kirk said:

I here people who call themselves capitalists and mock the old USSR for fixing the price of wheat yet seem happy that we have a system, that fixes the price of money and inflates asset prices.

nmppmztia4.jpg

 

26 minutes ago, kzb said:

But this time it is different, because all previous bubbles burst quite quickly.

Haha, that's an entertaining phrase. Yes, this is one of longest running bubbles I know of, but still  15 years isn't that long in the 1500 year history of the West.

27 minutes ago, kzb said:

One of the reasons is because they have had the demand to sustain it.

In my opinion, computing and comms advances have increased individual productivity to an extent which can scarcely be described in words. It is this productivity which the bubble is predicated upon. With all this excess wealth, maintaining the illusion of sustainability is a lot easier than it ever has been.

24 minutes ago, Riedquat said:

more building (a necessary evil)

What's wrong with building?

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2 minutes ago, Locke said:

What's wrong with building?

You really need to ask? It's one thing to not agree that what others find a problem and / or unpleasant is the same as what you do, but another to apparently not even comprehend how they could.

Edited by Riedquat

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21 hours ago, Locke said:

Mass immigration is certainly a factor, but it pales into insignificance compared to government-enforced credit creation.

credit has always been part of the economic system most companies have a credit line with the bank

anyone who thinks 3 mill migrants from the eu did not affect house prices does not understand supply and demand

18 hours ago, pig said:

See Australia, Canada (Hiya Carney), America, NZ, Republic of Ireland, Spain etc etc for other bubbles which essentially have feck all to do with lack of house-building or immigration.

we are talkjng about the Uk not anywhere else as it happens Aussie has had a lot of immigration as has Spain due to freedom of movement they have also had nearly 3 m from east europe

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33 minutes ago, kzb said:

agree up to a point and  there have been previous Bubbles.  But this time it is different, because all previous bubbles burst quite quickly.

This time it is more like the expansion of the universe, it is going on forever.  One of the reasons is because they have had the demand to sustain it.

as long as we have huge levels of immigration houses will be expensive

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39 minutes ago, kzb said:

I agree up to a point and  there have been previous Bubbles.  But this time it is different, because all previous bubbles burst quite quickly.

This time it is more like the expansion of the universe, it is going on forever.  One of the reasons is because they have had the demand to sustain it.

Banks only have 2 modes - foot on the pedal (lend, lend, lend) and hit the wall....

I suspect BTL (and low interest rates) are the real reason why this bubble has continued onward. The ability to use rental income as the basis of the loan means banks can lend more to your typical BTLer than to the renter who ends up paying the interest.

That's not to say that immigration and demand for property doesn't play a part. But there is more than one factor in play within this market and all the factors play a part in the current mess..

Edited by Houdini

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7 minutes ago, happyguy said:

credit has always been part of the economic system most companies have a credit line with the bank

Are you stupid?

21 hours ago, Locke said:

compared to government-enforced credit creation.

 

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  • 142 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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