Realist, not conformist analysis of the latest financial, business and political news

Huzzah! English House Prices Are Finally Falling – Glad That Worked Then

The biggest problem with trying to grow up and live in the United Kingdom these days is that the price of housing is simply vastly too high. As compared to any realistic level that could be afforded by those on average-ish incomes and without capital reserves of their own that is. Various methods have been suggested to deal with this problem most of them involving the spending of vast amounts of taxpayers’ money on the creation of permanent subservient classes in social housing and the associated jobs for the Tristrams and Jocastas in managing those estates.

The alternative solution is the one that we at the Adam Smith Institute have been pushing. Free the markets and housing will decline in price. Things that are high priced will be supplied, that extra supply will reduce prices.

The underlying point is that houses never really change all that much in price. The cost of a house is around the cost of building a house. What changes in value is the piece of paper giving you the right to build a house in a certain piece of land – the planning permission. We’ve no shortage of land we could use for houses, only 10% of the UK is built environment, only 3% of the place is housing. So, issue more planning permissions and watch housing prices fall:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] House prices fell in England for the first time in seven years in the first three months of 2019, dragged lower by the traditional property hotspots of London and the south-east in a sign that Brexit turmoil is putting off buyers. Prices fell 0.7% in the first quarter, compared with the same period in 2018, taking the average price of a home in England down to £255,683, according to the mortgage lender Nationwide. [/perfectpullquote]

Note that this is good news. A fall in the price of an input to life makes that life richer, we like deflation as long as it’s not of all prices simultaneously:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]But London was the weakest performing area in the first quarter of 2019, seeing prices drop 3.8 per cent year on year – the worst quarterly rate of decline since 2009.[/perfectpullquote]

What’s worst about it? This is good news, more people can afford a roof over their heads in London.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] In the first three months of the year, prices in England were down 0.7% from the same period in 2018. But the building society said that annual house price rises in Northern Ireland, Scotland and Wales meant the UK average was still growing. [/perfectpullquote]

Sadly this good news isn’t everywhere as yet but we can hope.

And, by the way almost, what is it that the government did about house prices being too high? Nope, they didn’t go build vast slave tenements for the state helots. Instead they insisted that everywhere start issuing more planning permissions. That is, even if a tad weakly, the solution was as the ASI pointed out it was. And, as is true whenever government follows ASI advice, the problem has been solved by doing what we say. Why, we might even say that the ASI is a think tank that thinks.

Could be just coincidence too but that would be both boring and the loss of a opportunity to puff breasts.

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Quentin Vole
Quentin Vole
5 years ago

only 10% of the UK is built environment, only 3% of the place is housing

Weasel stats. 25% of the UK is northern Scotland, where (to a good approximation) no-one lives. The SE of England – which is what people are talking about, house prices in Hartlepool are not prohibitive – is rather more densely populated.

Chester Draws
Chester Draws
5 years ago
Reply to  Quentin Vole

Indeed Quentin.

But what people choose to ignore is that the vast preference of people is to live in cities. People like cities and flock to them, if permitted. Moreover the evidence is that we prefer really big cities — the ones with least access to nature are the ones that grow fastest.

Insisting that we keep the countryside pure in the face of this evidence is based on romantic notions of what we *should* like.

Rhoda Klapp
Rhoda Klapp
5 years ago

Don’t on any account mention the other side of the supply.demand thing. I refer to the I-word. No, the other one.

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