Monday, December 19, 2011

Celebrating ZIRP and tax breaks

House prices create 27,000 more property millionaires in 2011

'Britain's two-tier housing market has been laid bare by figures showing that 27,000 new property millionaires were created in 2011 despite prices overall falling by 3pc. ... "strong demand" from overseas buyers has boosted prices for homes in the capital.' This is good news, right? I mean all that foreign cash snapping up houses in our country must be a positive thing since we seem to be so keen on this sort of thing judging by our tax sytem and monetary policy. Can't you fell life getting better as all those property millionaires keep popping up?

Posted by quiet guy @ 08:58 PM (1209 views)
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One thought on “Celebrating ZIRP and tax breaks

  • mark wadsworth says:

    Home-Owner-Ism is based on self-supporting circular logic, each step of which is entirely divorced from reality, it goes a bit like this

    house prices only go up
    when house prices go up, people become wealthier
    when people are wealthier, they can use their windfall equity to trade up to something even bigger
    this increase demand for bigger homes, this pulls up the price of ‘starter homes’ to balance, so…
    house prices can only go up

    and so on, repeat ad nauseam.

    simple truth is

    1. In the long run, land values do increase slightly faster than wages, that’s because (rather perversely) the more sophisticated an economy is, the more surplus over the bare minimum there is to be soaked up by higher rents and mortgage payments (ii.e. higher land values). However this is not A Good Thing, it is A Bad Thing because it means the share of the economy enjoyed by workers, entrepreneurs, investors etc goes down and the share consumed by the unproductive sector (land owners, bankers) goes up.

    2. Even in the absence of 1, higher house prices or higher rents make us all collectively poorer, this stands to reason as the gains are enjoyed by such a small group (“the one per cent”).

    3. How on earth can everybody trade up? It’s impossible, it’s like everybody in a full cinema trying to move forward one row.

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