Saturday, Oct 26, 2013

Land bubble on the up up up

FT: Housing boom sets off bidding wars in ‘frantic’ fight for land

With more planning permission and more borrowing it is all going into land prices, destroying any real benefit to the economy. The landowners always win, such is Ricardo's Law
"Britain's rapid housing market recovery has sparked a scramble for land, with bidding wars between building groups pushing prices up 10 per cent or more. As sales of new-build homes have surged, on the back of the government's controversial Help to Sell"

Posted by pete green @ 07:54 PM (4287 views)
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11 Comments

1. libertas said...

No, you have it ALL WRONG. Enough of this Ricardo twit.

Money is disproportionately going into land, because VAT, green taxes, regulations, heavy handed Unions, etc. make it uneconomic to invest in businesses with British production base, except where there is very high value added products. The Land Value folk seek to "re balance" the economy towards production by destroying the housing market with land tax, whereas I would seek to rebalance by taking away the burden from the productive part of the economy.

Saturday, October 26, 2013 08:50PM Report Comment
 

2. pete green said...

Low land prices and low taxes are both fundamental to a prosperous economy for all.

Saturday, October 26, 2013 09:57PM Report Comment
 

3. reticent said...

"... whereas I would seek to rebalance by taking away the burden from the productive part of the economy."

When you find yourself addressing the internet as a political candidate addresses the electorate, you have to ask yourself whether you're taking yourself a little too seriously.

Sunday, October 27, 2013 12:01AM Report Comment
 

4. novice pete said...

they make us pay for what we already own.

Sunday, October 27, 2013 12:40AM Report Comment
 

5. britishblue said...

Most house building companies have huge land banks. Some land is purchased 20 years in advance on the basis that permission for building will spread out from towns. . Much land is bought on options i.e. a sum is paid to the land owner and a bigger sum is paid when it has planning or developed. A couple of years from buying a piece of land to building would be a relatively short period of time, I think there is a lot of journalistic licence in this article

Sunday, October 27, 2013 10:47AM Report Comment
 

6. stillthinking said...

Is there some way to view this article for nothing ?

Sunday, October 27, 2013 12:33PM Report Comment
 

7. nickb said...

So it seems that building more houses may not lower house prices at all. At least, not before the next downturn. Should people be surprised after the overbuilding in Spain and Ireland, not to mention China where they are building ghost towns at increasing prices, that the more houses = lower house prices equation is a tad simplistic?
N

Sunday, October 27, 2013 12:42PM Report Comment
 

8. pete green said...

NickB

It all depends on peoples expectations and the amount of money available, more housing supply y can increase such sentiment and money supply going into the market. What we are seeing here is speculation based on a perceived increase in available lending and increased likelihood of getting planning permission, but for supply to start overcoming money availability and speculation it will have to be an quite a lot, more than what we will see in the next 5 years anyway.

I would say that a sustained building programme over the long term is bound to lower house prices, but only when speculation/money supply issue abate, or land taxes introduced. Such a programme could be achieved in a relevantly sustainable way (but I doubt there is political will for this, anymore so than Land taxes)

What we need is cheap land, so people & business can thrive and make sure that newly created wealth does not get sucked out by land price inflation.

Sunday, October 27, 2013 03:52PM Report Comment
 

9. britishblue said...

It will only become cheaper if new land is available e.g. from councils or land that was previously deemed as agriculture.. House builders put their land in the balance sheet and don't necessarily down value it when it goes down in value as it will effect profits, share price, etc., they just sit on it for a few years. So the price would only change if there was a change of law, like there has been in Poland, where a lot of land that was previously non building land can now be used for house building with a low threshold for planning.

Sunday, October 27, 2013 05:53PM Report Comment
 

10. vinrouge said...

As the government creates the extra value of the land purely by the act of changing planning status, they sould also take any resulting profit from the land owner in the form of CGT or a windfall tax.

Monday, October 28, 2013 06:18AM Report Comment
 

11. pete green said...

Vinrouge - that has been tried a number of times before by different acts, mostly labour, in the 20's late 40's and late sixties. It has never worked well, due to landowners holding land out of the market place and legal challenges and nefarious tax evasion. Land Value tax would achieve the same thing but much more efficiently.

Other countries have had a better stab at it but that means planning permission is granted and the land is then compulsory purchased, at the point of planning consent, then resold with the planning permission . It takes a long time to establish the legal case and is a cause of great local government corruption where implemented such as in parts of Spain.

Monday, October 28, 2013 09:49AM Report Comment
 

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