Tuesday, October 9, 2012

‘Builders’ are actually land bankers

Analysis - Tough rules and tight credit may thwart housing hopes

This review of the UK housing market and the role that building could play in boosting the economy reveals why building houses may not help get the economy moving much: "Local authorities say they have given permission for 400,000 homes that developers have yet to build, with some sitting there waiting for prices to rise." A while back, I recall reading on the Renegade Economist site that UK builders aren't really interested in building as much as land banking. The money is in land not producing things.

Posted by quiet guy @ 07:04 PM (1553 views)
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4 thoughts on “‘Builders’ are actually land bankers

  • mark wadsworth says:

    Actually, three-quarters of your profit is in simply getting planning permission. Then you can sit back and watch land prices rise partly due to the shortage of new housing caused by the fact that you are, er, sitting back and doing nothing. Actually building houses is fraught with risks and danger, both practical and political and is a bit of a mugs’ game.

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  • Land banking occurs because of artificially low interest rates and now QE stopping businesses from investing cash in banks which would then lend said money to home owners, driving demand for houses and also business loans, driving economic growth. So don’t blame the builders, this is the Bank of England’s fault.

    In addition, the land price inflation is also caused by money printing so, again, builders think they are chasing profits but are in actual fact battling to preserve their purchasing power vs a rapidly depreciating Sterling. Because other countries are also stealth devaluing it doesn’t look like that, but that is what it is.

    Of course, Marx Wadsworth will say that the solution is to tax those who dare attempt to protect themselves against devaluation in a relatively safe asset, but yawn, and as you see the reason we don’t solve these problems is because we listen to reactionaries such as him.

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  • mark wadsworth says:

    Of course, the main reason for inflation is Home-Owner-Ism.

    Owning land is not so much a protection against inflation, it’s more the case that landowners LIKE inflation, that’s why we have it, so it’s a self-fulfilling prophecy.

    If on the other hand we had a tax and welfare system which didn’t go out of its way to discourage work, enterprise, employment, real investment, saving etc, people would see inflation as a bad thing, and we’d have higher interest rates, lower inflation etc, and the old fashioned notion that you can become rich by doing nothing except rely on the government to prop up land values – land values are only as safe as the force of state is, landownership and the existence of a state being synonymous – would be seen as totally weird.

    Oh yes, and Libertass is an ass, but I’m sure most of your are dimly aware of that 🙂

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  • ‘The views of Norman Hunt, a retired builder living in a London suburb that saw its last big wave of construction in the 1930s, are typical. “I’m not in favour of building anywhere around here, but if they did it elsewhere, and it got things moving again, then we definitely should,” he said.’

    Can this guy seriously hear what is coming out of his mouth? Or is he being ironic?

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