Sunday, May 25, 2014

Supply can never catch up with irrational demand?

At the Top of an Overheating Housing Market – ‘Relaxing Planning’ can Make Matters Much Worse

Interesting blog on the idea that more supply will solve our housing problem: "So if the market is near its peak supply side measures such as relaxing planning can make matters worse. Planning is a medium-long term measures. By all means increase supply, as a long term well planned and rational way looking at a horizon of 10, 15, 20, 30 years through Garden Cities and other measures, not in a crazy rush which may simply pop the bubble and leave house builders like in 2009/10 with a massive burden of landbanks the debts of which they cannot service and which will drag down house-building levels to historically low levels."

Posted by pete green @ 10:08 AM (1519 views)
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One thought on “Supply can never catch up with irrational demand?

  • stillthinking says:

    Very interesting. It’s certainly true that letting property fall in nominal values will kill off development, but that’s the challenge for Carney. How can he keep housing rising in nominal terms, yet stop the saving rate from collapsing. Particularly given where we are, with no confidence in savings and a bubble in the capital, and prices not far off the bottom elsewhere. The answer given so far is that he can’t, and he must resort directly to credit controls to prevent people fleeing into property.

    Certainly if there were a genuine commitment to ease the housing shortage you can consider prices to fall, but as has been pointed out so often, 250,000 new properties every year with a huge requirement in London is a LOT. Does that choice even exist? Probably not.

    So IMO the situation doesn’t really change, things move on the same until there is a crisis in sterling, which is going to be vulnerable for as long as the outstanding debts are critical, which is a generation. Plenty of time for a crisis.

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