Why are house prices so high?

The government wants more houses to be affordable. There is a particular shortage of affordable homes to buy in popular arenas.The government has developed policies to help people save a deposit for their first house and to raise the mortgage finance necessary to purchase. This has now helped a lot of first time buyers. Its critics say it is a further self defeating boost to the prices of the properties people want to buy, though this is an unfair exaggeration.

House prices have been driven higher by the interplay of four main forces. First, the pursuit of easy money  policies through QE and ultra low interest rates has allowed people to borrow much more relative to their income, allowing higher prices.

Second, the big boost to demand, as the country finds housing for a large number of new arrivals  in the recent years of high net inward migration.

Third, the relatively low level of new building as a result of the crash at the end of the last decade and the cautious recovery from the slump by house builders concerned not to overcommit again.

Fourth, the concentration of demand for  rent and for ownership in London, the south east and a few other locations of fast job growth.

A slower rate of advance in house prices, maybe encompassing a slow reduction in real prices, might help. A sudden house price fall would be bad for confidence and would set back building more homes.

In order to bring potential supply and demand into better balance the government does need to make progress with a new migration policy, and with its initiatives to get more homes built. There is some  progress with more factory based manufacture and assembly of systems and parts of hones. The more that can be done in the factory, the less the time needed on site. It can raise quality, reduce weather interruptions and speed total construction time.

Slower money growth and higher interest rates could curb prices but would also prevent more people buying a home  at all. Spreading new jobs and prosperity more equally around the country would help, as there are more affordable homes in the less pressurised parts of the UK.

In nany locations there is plenty of scope to adapt old retail and commercial property to residential. It can be done by demolition and rebuild, or by adaptation and improvement. Many places need to change the shape and size of their shopping and business areas given the changing face of retail and business in the age of the internet.

 

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133 Comments

  1. stred
    Posted October 29, 2017 at 5:43 am | Permalink

    The graphs showing house affordability and net increase in immigration in the various regions of the UK correalate almost exactly. Yet the liberal/socialist establishment refuses to recognise this an calls any such suggestion a racist smear. It is a sad reflection on state education that the 16-40s,who are so aggrieved at their inability to buy and high rents, have swallowed this indoctrination and accept the Corbyn line that the whole problem is one of lack of state spending.

    Mayor Khan promises to build more in the city with the biggest problems but never does, because there is a lack of available land. It is land values due to shortage that prevents the building of more than 130-200k units pa in the UK, when population growth is forecast at 4-8m by the end of the decade. The failed Osborne recommended building on the green belt. It is true that if we build over the countryside then population can increase, but the same conservatives and green politicians do not wish do so.

    • stred
      Posted October 29, 2017 at 5:55 am | Permalink

      It is interesting to see that Sir Bob Kerslake, the retired top civil servant who has offered to help Corbyn become PM, was high in local government and one of the many members of Common Purpose. This purpose appears to be to promote supra- national government and is of course against Brexit. It is also notable that they have had an influence with Conservative governments and help to explain what Cameron’s ideas were all about. It is largely feminist and is promoting the LGBT transgender stuff in schools that many of us wonder about. With Mrs May and her remain cabinet in full swing to keep us in the EU until the next election, many of us are beginning to question whether there is an agenda here that we are not aware of. The latest exposure is the merging of the British forces and nuclear deterrent with the plans of the EU, which were covered up by Remainers.

    • Iain Moore
      Posted October 29, 2017 at 8:26 am | Permalink

      Whenever the housing issue is debated they always talk about supply , demand is never mentioned, or perhaps permitted to be mentioned. The self censorship about the effect immigration has on the housing market is close to the level of restrictions on debates one might find in a totalitarian regime. There is something very sick and twisted going on within our chattering classes. In this John Redwood should be thanked for listing it as one of the causes. What is hard to understand is why the Conservative party as a whole limits its debate of the housing shortage to the confines the left have placed on it, when not mentioning the negative effects of immigration just helps the Labour party.

      • Denis Cooper
        Posted October 29, 2017 at 1:39 pm | Permalink

        Oh, come now, Iain, don’t you know that every immigrant brings with him not only a house but also the land on which it will stand, and additional road space and water supply and sewage disposal capacity, etc etc etc.

      • Spratt
        Posted October 29, 2017 at 3:09 pm | Permalink

        Another issue that hasn’t been mentioned is the effect of single parent families becoming almost the norm so that fathers often live somewhere else, necessitating more housing. The most egregious example of this that I have seen was a case where a woman lived with several kids (including baby) while the father of all the kids lived round the corner in an identical house. They seemed to be on more than excellent terms and one had to surmise that this arrangement conferred various benefits..

    • Anonymous
      Posted October 29, 2017 at 11:00 am | Permalink

      Stred – Remember that the roads, hospitals, schools and job districts need to be built with them.

      Too many large estates are being tacked onto the peripheries of towns without any regard to infrastructure, amenities and local employment. They are being used as dumping grounds for city overspill.

      • Stred
        Posted October 29, 2017 at 12:39 pm | Permalink

        Darenth valley, the most lovely countryside near my part of London has been chosen by Osborne for development. Not quite the sort of place a metropolitan would chose to visit.

    • Timaction
      Posted October 29, 2017 at 2:07 pm | Permalink

      Just stop immigration except for the most qualified. Lets see the numbers reduce. Net reduction!!! Problem of housing, health, education, and congestion solved. Why haven’t the Tory’s done anything about this? Not interested as Gideon has told us. We need a party that stands up for England and the English. All legacies just look after anyone foreign not its indigenous population.

  2. Lifelogic
    Posted October 29, 2017 at 6:26 am | Permalink

    Simple relax planning, cut the OTT green grap building regulations, abolish the absurd up to 15% stamp duty, cut utility connection charges, cut the social housing and other planning gain taxes, cut the absurd taxes on landlords and this tenants and the private sector will supply. ……

    Having said that outside certain hot spots properties are not all that expensive about the same in real terms as 10 years ago. Under the ERM loving, daft, lets bury the Tories, the socialist dope John Major we had mortgage rates at around 17%. This does not work out cheap, even if the houses were a bit cheaper in capital terms. What people regard as a nice house now is a rather different thing to a house of 20 years ago too, double or triple glazing, power showers, far more bathrooms, sliding folding doors, electronics, better security and alarms, larger, extensive fitted white goods, electric gates and other such gizmos.

    • Hope
      Posted October 29, 2017 at 10:11 am | Permalink

      Planning legislation changed ad Ito up have not noticed urban ghettos are being built under the name of rural villages! The govt wants to blame the LAs but it is responsible. The CIL and NHB money is not being used for much needed infrastructure it is still going on vanity projects and football salaries of CEO and managers at LAs. What has Jarvis done other than blame someone else? Nothing springs to mind. I accept your point about stamp duty, that was straight out of the socialist hand book of Osborne following New Labour.

  3. Lifelogic
    Posted October 29, 2017 at 6:36 am | Permalink

    May and Hammond show every sign of being as misguided as the hapless Major and seem set to bury the party similarly. Let us hope Hammond finally does something sensible in his budget. Start by undoing all the stupidities that Brown, Darling, Osborne and he have done and finally keep the £1 million each IHT promise of the appalling ratter Osborne.

    Lower, simpler taxes and a bonfire of red tape and government waste, which is absolutely everywhere.

    • mickc
      Posted October 29, 2017 at 9:26 am | Permalink

      Yes, hopefully May and Hammond will bury the Conservative party as presently constituted. We may then get a true Conservative party….not just Bluelabour.

  4. Miss Brandreth-Jones
    Posted October 29, 2017 at 6:40 am | Permalink

    I am in favour of restoration of the outside existing buildings which in fact can add character to towns and suburbs.Once the shell is in place much can be achieved by exciting design instead of the hum drum square boxes all in line which look clean manageable at first, but after 40 years look dated and tacky.

    Building on already designated space leaves town planners to change the shape and appeal of our communities. I have an issue with town planning. I cannot see why huge tin vulgarly painted buildings dominate roads and lying behind are open fields and green/brown ground going to waste . One would think that planning, rather than seeing projects as merely utilitarian, would also realise that aesthetics play a considerable part in making localities desirable and in this way create a more lucrative environment . Roads which are tree lined could easily lead off the main roads to these tin monstrosities .

    Sprawling new housing all over our space is not a way to make the UK desirable for the future . It will spoil what we are,We need to find other ways to house people.

    Just looking at Captcha there is a view through a window of the horrifying presentation of what could be the whole of England.

    • Anonymous
      Posted October 29, 2017 at 11:06 am | Permalink

      The country is being ruined.

    • Miss Brandreth-Jones
      Posted October 29, 2017 at 1:25 pm | Permalink

      I must have been half asleep when I wrote this.Corrections;-
      outside OF existing buildings.
      clean AND manageable
      Leaves town planners A CHANCE to change

  5. Anonymous
    Posted October 29, 2017 at 6:40 am | Permalink

    It is no good building houses without jobs, services and infrastructure to go with them, which we are seeing a lot around here.

    Clearly overcrowding is at the root the whole problem.

    It begets the confidence in borrowing, which begets the reluctance to make borrowing expensive which begets rising prices the feeling that everyone on the ladder is getting richer when, in fact, we are all getting poorer – not just those locked out.

    Most of us will be bank-of-mum-and-dad soon.

    • Dame Rita Webb
      Posted October 29, 2017 at 8:42 am | Permalink

      Not unless you die early otherwise your families wealth will be strip mined to pay for your long term care. Keep in mind though the feckless will be getting theirs for free.

      • Ian Wragg
        Posted October 29, 2017 at 3:05 pm | Permalink

        Not only the feckless but a sizeable contingent of foreigners are being kept in care homes by the taxpayers.
        The latest announcement that EU nationals can bring in family after Brexit will probably add considerable numbers to this category.
        The population is projected to reach 73 million by 2030. No amount of house building will accommodate these sort of numbers. Add the odd few million illegals which will no doubt get an amnesty and we’re in real trouble. It’s not a supply problem it’s an out of control demand that’s the problem.

        • Dame Rita Webb
          Posted October 29, 2017 at 6:11 pm | Permalink

          This is something the open borders brigade seem unable to understand. The longer they keep coming in the eventual collapse of their beloved welfare state comes more into view. You do not know who to have more contempt for, the rich ones who never used it or the less affluent do gooders who are really going to have their lives turned upside down when they need the “safety net”.

        • Lifelogic
          Posted October 30, 2017 at 6:30 am | Permalink

          Indeed the feckless seem to be encouraged by government at every step. All will be equally feckless.
          This seems to be their goal.

    • APL
      Posted October 29, 2017 at 8:45 am | Permalink

      Anon: “Clearly overcrowding is at the root the whole problem.”

      [sarcasm] Not at all, just like with jobs in London Transport in the ’50s, so, today. We need more immigrants to live in the houses that British citizens refuse to live in.[/sarcasm]

      In Tory land these days, the laws of supply and demand have been suspended. You can have infinite demand for a commodity, yet nobody in the Tory party can figure out why the price of that limited commodity is sky high.

      Thank god they aren’t trying to fix the price of food.

    • Turboterrier.
      Posted October 29, 2017 at 9:43 am | Permalink

      @ Anonymous

      It is no good building houses without jobs, services and infrastructure to go with them, which we are seeing a lot around here.

      Brilliant comment, the core to the problem.

      Never mind just putting a percentage of housing to “social affordable “needs planning large developments also insist that there are business units to encourage the self employed or business start ups to use.

      But the whole key to the problem is an efficient infrastructure, trunk road links and access, schools, surgeries and social amenities.

  6. eeyore
    Posted October 29, 2017 at 6:53 am | Permalink

    In the light of JR’s last paragraph, it would be helpful to overhaul the CGT regime so that change of ownership can follow change of use without incurring unacceptable financial penalties.

  7. David Cockburn
    Posted October 29, 2017 at 7:01 am | Permalink

    With the cost of permissioned land being half the cost of a new house, measures to reduce the cost of building will fail to stop the rise in prices. The only answer is to make it significantly easier and cheaper to get permission to build and then ensure that the houses are built.
    This is not helped by the oligopoly of the big builders, nor by the NIMBYs, nor by the desire of most people not to live next door to an ugly house built to a price.
    The best alternative would be to abolish Labour’s Town and Country Planning Act and start over.

  8. Norman
    Posted October 29, 2017 at 7:26 am | Permalink

    I remember prices for a new 3 bed-roomed house in the Bristol area back in the early 1970s being around £4000. In the space of 5 years, the same type of house would cost you £10,000. As I was in a tied house at the time (went with the job) I watched this trend with alarm, whilst others pocketed their (in my view) ill-gotten gains.
    I could see that the social consequences were going to end in tears, and am only surprised that the crisis has been so long delayed. Those same houses, already rather ‘tired’- looking, now fetch around £200,000! All this happened in the absence of the factors you list. I suspect that, along with oil price hikes, this is the main reason for a vastly weakened economy, where the real value of money has been lost. Meanwhile, I agree that anything that can be done to help young people get a decent affordable home, is commendable.

    • Dame Rita Webb
      Posted October 29, 2017 at 9:08 am | Permalink

      Norman you scored a hole in one with this comment. The UK has an economy that is built around speculation rather than innovation. With tax credits and all the other associated handouts there is also a de facto acknowledgement from the political class that the economy is incapable of generating enough high paying jobs either.

      Incidentally I left Bristol three years ago. If I wanted to buy my old house back I would need to take out a chunky mortgage and this is despite it being alongside a noisy and busy main road. I sold it to someone who works in London and that tells you a lot about its property market if people find the distance between the two cities “doable”.

      • libertarian
        Posted October 29, 2017 at 7:42 pm | Permalink

        On the contrary Dame Rita

        I’ve just completed my latest analysis report into the current UK jobs market and you are as usual wrong about jobs. We have a huge number of highly paid jobs and skills shortages to go with it. In fact the number of unskilled jobs ar diminishing rapidly as more and more work is automated .

        There are 749,000 unfilled job vacancies in the UK today

        • Dame Rita Webb
          Posted October 30, 2017 at 8:29 am | Permalink

          and pensions are “tax free” are they? What are you an “employment expert” in this week? A couple of weeks ago it was “digital” and previous to that it was “pharma”?

    • Anonymous
      Posted October 29, 2017 at 11:08 am | Permalink

      ” I agree that anything that can be done to help young people get a decent affordable home, is commendable.”

      Reduce the number of people coming to compete for their housing – especially returning jihadis whom MI5 proposes we put in state housing to discincentivise them from killing us.

      • forthurst
        Posted October 29, 2017 at 12:59 pm | Permalink

        It is rather difficult to understand for people who still persist in getting their news from the MSM. However it is perfectly logical provided you are aware that ISIS are the bad guys in Iraq where they are the remnants of Saddam Hussein’s army but they are the good guys in Syria where they are backed by ourselves and our ‘allies’ in the region; thus any attempt to prosecute returning Britons with terrorism offences would result in their defence lawyers spilling the beans in open court. The English obviously are potential collateral damage, but who cares about them? Certainly not this vile treasonous government which has now abandonned proper policing in favour of policing our thoughts.

      • Timaction
        Posted October 29, 2017 at 2:16 pm | Permalink

        You couldn’t make up the failure of Government policy to perform its first duty to protect its citizens!! 20,000 less police, reducing armed services whilst increasing the Foreign aid budget. Whilst having a social care crisis, underfunded NHS, giving away those services free on arrival to anyone from anywhere on Earth. So what has (dis)May done after her “enough is enough” comment? Teaching our children to run away without tackling those who would seek to harm us or stop them coming back here! If people keep supporting the legacies they will get more of the same.

        • APL
          Posted October 30, 2017 at 8:35 am | Permalink

          Timeaction: ” First duty to protect ”

          Be fair, they take protecting themselves very seriously. That’s why the troops were deployed first outside Parliament

      • Chris
        Posted October 29, 2017 at 2:30 pm | Permalink

        Re your last sentence, you couldn’t make it up what they are doing. Madness.

  9. Duncan
    Posted October 29, 2017 at 7:27 am | Permalink

    Labour’s unstated policy of creating an ingrained sense of entitlement is now paying dividends for them. Young people thinking they are entitled to own something, whether than be a property, a car, anything simply because they live in the UK. That’s not real life.

    Of course, Labour is also conscious of the fact that young people have something they want, a vote. Therefore young people become young voters, a valuable political commodity for all political parties.

    Therefore, political parties are under immense pressure to offer the young ‘the earth’ to secure their patronage. Labour does this very well, buying votes with taxpayers money through welfare, is part of their DNA. For the Tories their moral belief in self reliant individuals runs counter to Labour’s politics of state dependency

    The Tories mustn’t think they can buy young people by bribing them with inducements to buy or finance the purchase of property. The young do not vote Conservative. They’re young, naive and easily led. They are the perfect fodder for Labour who will do anything and say anything to secure their souls

    What the Tories must do is talk to those voters in a mature, sensible fashion. Cutting taxes across the board is fundamental to giving people back their power. Less state spending equals less political power for the State. Ram this message home. Tell people that the more income they can keep the less power politicians possess. They will embrace that message. People hate politicians. Therefore give people the impression that you are prepared to sacrifice your own power to increase the people’s power…

  10. sm
    Posted October 29, 2017 at 7:32 am | Permalink

    One major obstruction I suggest is the planning appeals procedure – Councils and their electorate may well dislike a submission for good reasons, but simply cannot afford the risk and costs of legal challenge.

    A second obstruction is that within the myriad complexities of planning law, there is a substantial potential for corruption. Some years ago, a proposal was put forward in my constituency for the creation of a nature reserve open to visitors within an urban environment – it stalled in the bowels of the Town Hall for months, with no explanation given – the person handling it was always away from his desk, or on holiday. After months of investigation, the project only proceeded when I brought the matter to the attention of the Council Leader; we all (councillors included) strongly suspected, though could not prove, that the unconscionable delays were due to the developer not offering inducements to certain members of the Planning Dept. The project is now a resounding success.

  11. Mark B
    Posted October 29, 2017 at 7:50 am | Permalink

    Good morning.

    The government wants . . . .

    Er no ! It is not about what the government wants. It is about what the people want. Government is just a servant of the people. STOP this Socialist thinking, you are supposed to be a Conservative.

    You are forgetting a fifth element – Government policies. eg High Stamp Duty. No mention of reducing or abolishing that I see. What should a private transaction between parties be subject to this arcane tax ? The government has, through funding various White Elephants, put itself on the path of being a high tax regime, which stunts growth.

    As I keep saying. Government needs to do less with less.

  12. Dave Andrews
    Posted October 29, 2017 at 7:54 am | Permalink

    No more houses please. The country is already over-occupied. You can see that from the levels of congestion and difficulty in accessing services such as GPs and schools. A commitment to reduction in net migration is needed, and to make better use of the population already here to do those jobs we currently feel we need immigrants to do.
    Tackle house prices first by following NZs lead and clamp down on foreign speculators buying up residential property. If that’s not enough, put a cap on how much UK residents can own aside from their own home. Reduction in demand ought to suppress house price inflation.

  13. Thames Trader
    Posted October 29, 2017 at 8:10 am | Permalink

    You’ve missed a fifth force driving house prices up.

    Very low interest rates on savings have encouraged people looking for a better financial return into buying a property to rent. They win from receiving ongoing rent income at a relatively high rate of return as well as taking a punt on the value of the house rising. Osborne’s tax rises are choking off this practice, though.

  14. alan jutson
    Posted October 29, 2017 at 8:12 am | Permalink

    Reason for high house prices:
    Uncontrolled immigration now in vast numbers.
    Unsustainable Low interest rates.
    Bank of Mum and Dad helping with purchase
    Government subsidised schemes to help with deposits
    Lack of volume house building.
    Past, poor restrictive planning decisions.
    No New Town Development proposals.
    High Stamp Duty rates.
    CGT with no indexation.

    In short more demand than supply.

    • Know-Dice
      Posted October 30, 2017 at 10:53 am | Permalink

      AJ – Got it in a “nutshell”…

  15. Honest John
    Posted October 29, 2017 at 8:19 am | Permalink

    One reason why the house prices go up is simply because the mortgage valuers who value the over priced new build properties and who are commission insentivised rubber stamp the values on the mortgage valuation reports.

    The next phase of the development is then offered to the market at a higher price by the developer which are once again rubber stamped by the commission driven mortgage valuer.

    The mortgage valuer usually just uses comparable evidence from the over-priced development to prove the over-priced new build property is “market value”.

    It’s a beautiful simbiotic relationship. The developer sells the over-priced new build properties and the mortgage valuer makes lots of commission.

    Dr Redwood take a look at that building the other side of Parliament Square and start asking some very awkward questions please!!

  16. agricola
    Posted October 29, 2017 at 8:24 am | Permalink

    House prices are so high because they demonstrate the first rule of economics, demand exceeds supply and therefore prices rise until a reduced number of people are the only ones who can afford to buy. It is a balancing act. It is a situation exacerbated by the 600,000 immigrants entering the country each year. As they are generally young their rates of reproduction are higher than those that leave, so stoking demand. They are also unlikely to be able to afford the sort of property sold by leavers to fund their retirement in many cases.

    The price of building land is high because regulation limits it’s supply. The cost of building is high because the industry is set in a nineteenth century concept of how you build houses. Brick on brick is neither productive nor likely to produce the best quality outcome. Houses should be built in factories in the quality controlled way that cars are built.

    Government taking it’s cut at all levels is no great help, VAT, Stamp Duty, Legal Fees, Rates, Expensive Energy, and IHT all take their toll in a negative way to the cost of housing. Government needs to unravel it or continue bewailing the situation for the foreseeable future.

  17. Old Albion
    Posted October 29, 2017 at 8:27 am | Permalink

    JR, houses are expensive because there is a shortage.

    There is a shortage because we have had uncontrolled immigration for close on two decades.

    The answer is simple. Leave the EU. Cease ALL immigration until everything is back in balance.

    Simple.

    The (dis)UK/EU ‘concreting over ENGLAND to house the world’

  18. Richard1
    Posted October 29, 2017 at 8:37 am | Permalink

    Fifth we have very restrictive planning laws, in which in particular it is very difficult to single or small numbers of new homes. There needs to be radical reform in this area, including redefining the green belts

  19. oldtimer
    Posted October 29, 2017 at 8:41 am | Permalink

    For the first time in my life I attended a property auction last week. For me the intent was to get a fix on property price trends in an area we are thinking of moving to. There were 36 properties listed ranging from plots of land, commercial sites for redevelopment, flats and houses. All were in the south east of England. 4 were sold before the auction and 3 were withdrawn. Of the remaining 29, there were 9 successful bids, 12 bids failed to achieve the reserve price and 8 lots failed to attract a single bid including the property I was following to get a fix on house price trends.

    I have no idea if this was a typical result for a property auction. Nevertheless the impression I formed was that the market has softened and that current asking prices for houses is too high. I do not think that vendors have yet cottoned on to this – or least not until their property has been unsold on the market for six months or more.

  20. Nigel
    Posted October 29, 2017 at 9:09 am | Permalink

    People was to live and work in towns and cities. The solution is to build higher and smaller u nits, max 60 m2.

  21. Bob
    Posted October 29, 2017 at 9:19 am | Permalink

    The UK has an open door to 485 million EU passport holders and any who turn up are entitled to be housed at taxpayers expense if required.

    I wonder if this has any effect on demand?

    The illegal subletting of social housing is also out of control, and makes lots of money for those involved in the racket.

    The govt appear to have no appetite to deal with any of these issues.

    • Denis Cooper
      Posted October 29, 2017 at 1:43 pm | Permalink

      Well, each of the 3 million EU migrants has to have somewhere to live, it would be unreasonable to invite them here but expect them to sleep on park benches.

      • rose
        Posted October 29, 2017 at 6:47 pm | Permalink

        Actually, one does see Eastern Europeans sleeping rough. One never sees people from other continents sleeping rough. Do the latter score higher points with the housing departments?

  22. Rob Jump
    Posted October 29, 2017 at 9:27 am | Permalink

    If government wants lower house prices why has it followed policies designed to push them up? This has been the case for at least 35 years for government after government. Higher house prices pleases the well off and makes the poor more dependent on government handouts providing more votes all round for interventionist policies- a win/win for big government.

    • Stred
      Posted October 29, 2017 at 12:48 pm | Permalink

      Because it helps the Treasury balance sheet and eases borrowing the by government.

  23. mickc
    Posted October 29, 2017 at 9:29 am | Permalink

    The housing problem cannot be fixed without drastic reform of the corrupt planning system which favours large developers and blocks small local development….so it won’t happen.

  24. Peter Parsons
    Posted October 29, 2017 at 9:50 am | Permalink

    Scrap Council Tax, Business Rates, Stamp Duty on property, Section 106 payments, the Community Infrastructure Levy and the Annual Tax on Enveloped Dwellings and replace them all with a Land Value Tax set locally, one rate for residential, another for business.

    Housebuilders will soon up their pace of building once they start paying LVT on undeveloped land which has planning permission. Under the current system it is in their interest to keep supply short as it means they can charge more for new properties, their build costs are lower (less demand for raw materials and labour), and thus they make extra margin at both ends. Meanwhile they are not penalised for doing so.

    It also doesn’t help that this government’s solutions to the housing market involve using large amounts of taxpayers money to prop up the demand side rather than fixing the supply side.

    • A different Simon
      Posted October 29, 2017 at 9:11 pm | Permalink

      Only crony capitalists seem to be against LVT .

      True capitalists should be in favour of it like Winston Churchill was and Adam Smith was with his Annual Ground Rent proposals .

      The tax system is biased against people who have to work for a living and has for the past 50 years favoured people with land and investment income .

      As well as replacing the taxes you mention , treadmill taxes like Income Tax could be reduced if the burden of taxation was moved onto the natural monopoly which is land , thus levelling the playing field between prospective owner-occupiers and property speculators .

      • Peter Parsons
        Posted October 30, 2017 at 10:33 am | Permalink

        I completely agree. Introducing LVT appropriately could permit reductions in VAT, Income Tax, Capital Gains Tax and Inheritance Tax.

  25. Eric Sorensen
    Posted October 29, 2017 at 9:59 am | Permalink

    Compare with Scandinavian prices and something funny happens. Manual labour cost is twice that of the UK, so that’s not the reason. Absurd stamp duty levels (working against the mobility that society needs) and red tape along with lack of available land is the answer – the cost of building materials is roughly the same – why housing of better quality is available at much lower cost elsewhere.

    Getting young people on the property ladder is not only the decent thing for any politician to cater for, but indeed the absolute best way, nothing comes even remotely close, to keep voters from turning left.

    • Stred
      Posted October 29, 2017 at 12:52 pm | Permalink

      Sweden has a huge amount of land in the area like France, and where housing is affordable.

    • libertarian
      Posted October 29, 2017 at 7:48 pm | Permalink

      Eric

      Sweden is a country roughly the same size as Great Britain, Sweden has a population of 10 million GB 65 million , I think that explains it better dont you

      • stred
        Posted October 30, 2017 at 12:39 pm | Permalink

        Sweden 450 km2, UK 243 km2

  26. Peter A
    Posted October 29, 2017 at 9:59 am | Permalink

    The main force behind the continued increase in house prices – to bubble levels – is the lack of other decent investment opportunities. Too many baby-boom generation and property speculators have bid up the prices. Buy-to-let has been seen as the alternative pension. I doubt many recent immigrants buy their homes – they are renting with pensioners as landlords as well as earlier immigrants who saw the writing on the wall and put their money in property. The foreigners who buy London flats at exorbitant prices are a niche market and actually are good for the country in that they can be heavily taxed. But why in earth tax the budding indigenous home-buyers to hell and back (stamp duty) and put them off buying a home? House prices could collapse if the Govt raises interest rates, we all know that. . .too many will be squeezed on mortgages payments. Besides our main cities are too densely populated for roads, etc and public transport to cope. The cost of building has also ballooned with so many environmental concerns, surveys for this and that & the other, building materials themselves, infrastructure levies, severe building regulations which are not always that appropriate – but instead of nice to have, all these rules are made enforceable on everything. Massive cost of building = massive prices to be paid by the prospective householder. The Govt needs to learn from the experiences of building new towns (eg Bracknell, Milton Keynes . . . .) and start building from scratch. My suggestion would be middle England. And make tax concessions to encourage businesses to move there.

  27. KeithL
    Posted October 29, 2017 at 9:59 am | Permalink

    In this day and age when astronauts can live in space bubbles it should not be beyond the wit of our planners, developers, architects and builders to come up with a variety of home/house designs more compatible with modern day living and affordability- yes with factory built type units delivered and assembled on site as required. The important thing for comfortable living homes is adequate floor area size, good windows/natural daylight, heating and ventilation, with the correct number of rooms required for decent living- nothing more – nothing less, good insulation against cold and noise, if possible near to shops schools and work etc with public transport available. Modern day living does not require anymore the by now so many old fashioned three bedroom semis with postage stamp type front and back gardens in rows located a million miles from anywhere, just better housing and apartment block designs with spacious layouts and with open common greenery properly planned and maintained near to facilities- government will have to take the lead with this because we cannot trust anymore the planners developers builders architects etc they all have their own agendas – nothing will be done

  28. Christine
    Posted October 29, 2017 at 10:00 am | Permalink

    There are some easy answers that have been suggested many times on this forum but continue to be ignored:
    1) Make the buying and selling of homes cheaper. Youngsters want to be mobile so they can move jobs. Why would they want to be saddled with a house when it costs so much to relocate?
    2) Encourage firms to move jobs to the north of the country where homes are much cheaper. We see the Government doing the opposite of this by moving Civil Service jobs from cheap locations in our Northern towns to very expensive locations in the cities. My own area has lost thousands of jobs even though it provided a well-educated workforce with cheap housing. As the jobs go the housing gets even cheaper but the areas become deprived and nobody then wants to live there causing a downward spiral.
    3) Balance social and private housing rents. Set council house rents at market value then means test the occupants giving top-ups to those on lower incomes. This would stop sub-letting, the subsidised council house for life mentality, the unfairness of a system where some of the population get a discount and others pay the full market rate. How often do we hear of people on high salaries still living in taxpayer subsidised housing especially in London.
    4) Provide retirement villages in cheaper areas of the country at fair costs. It used to be the case that when people retired they moved to the seaside thereby freeing up houses in the towns and cities.
    5) Finally the most obvious – reduce immigration. If we can’t satisfy the demand then reduce it.

  29. Bert Young
    Posted October 29, 2017 at 10:06 am | Permalink

    As the most densely populated country in Europe we cannot sustain the rate of immigration as it stands ; obviously the problem and cost of housing is synonymous with this . The methods involved in house construction can be re-arranged to create more housing availability – prefabrication in particular ; material and labour costs would be reduced and the advantages passed on to the buyers . But any sort of improvement is not going to face up to population growth with all its knock-on consequences – space and facilities are simply not there . Latest figures show our population to be in excess of 70m in a short space of time .

    I am very much opposed to the increase in housing supply and I trust that the Government and Local Authorities will unite together in the protection of the construct of our society as it stands . One responder has already mentioned the irresponsibilty of personal debt that exists and the particular effect it has on the young ; reducing the cost of housing and increasing its supply has enormous disadvantages to everyone .

    • Stred
      Posted October 29, 2017 at 12:56 pm | Permalink

      Prefabricated housing is a saves little time and expense overall. Site preparation and and services plus planning and hold ups cost far more.

      • Anonymous
        Posted October 29, 2017 at 5:55 pm | Permalink

        Most houses are built with prefabricated components these days anyway. Few wet trades are involved anymore.

      • Stred
        Posted October 29, 2017 at 8:28 pm | Permalink

        My smart adds verbs and pronouns while I am spotting Road signs.

  30. libertarian
    Posted October 29, 2017 at 10:16 am | Permalink

    We could of course use the tax system to help people afford a first home. We used to have MIRAS but as the government are fraudulently manipulating interest rates that won’t help. How about offering tax incentives to first time buyer savings, how about making them tax free even like pensions, how about a tax free home ISA

    Of course non of this will happen as this laughable government is hell bent on raising more and more in tax to squander on nothing in particular at best and pork barrel projects so beloved of talentless politicians

  31. Anna
    Posted October 29, 2017 at 10:17 am | Permalink

    All over the country there are out of town shopping centres and industrial and business parks. Is it beyond the wit of man (or architects and town planners) to build upwards in future and add flats or small maisonettes, perhaps with a safe play area for children, to these buildings for genuine first time buyers (no buy-to-let) or for ‘downsizers’ who would release a larger property onto the market? Occupants would have food/shopping/café/ parking facilities to hand. With thoughtful landscaping and tree planting, these areas would be pleasant places to live.

    • rose
      Posted October 29, 2017 at 6:55 pm | Permalink

      It has been shown that low rise terraced housing can fit in far more people than skyscrapers – which are undesirable in many other ways, not least as has been demonstrated by the fires in London. People don’t want to live in skyscrapers, especially if they have children. And other people don’t want to look at them. The planners and architects took a long time to admit all this and when they finally did, they couldn’t pull down the offending skyscrapers because of out of control immigration.

      • rose
        Posted October 29, 2017 at 8:20 pm | Permalink

        But please, please, please don’t let’s build any more.

  32. Epikouros
    Posted October 29, 2017 at 10:19 am | Permalink

    There cannot be any argument against what you say. You have once again pointed out ways to ameliorate the problems associated with an imperfect market in this case housing. Unfortunately no market is perfect however those markets that are allowed to operate with little or no regulation and external interference have an inherent mechanism that automatically addresses that fact.

    Housing like many others is a market that has been so mishandled by government regulations and political interference that it is worse than imperfect it is broken. Every politician and vested interest some for what they believe are good intentions and some for more selfish reasons have distorted the housing market and others so that they do not satisfy the simple process of matching supply with demand.

  33. Turboterrier.
    Posted October 29, 2017 at 10:20 am | Permalink

    Sorry John but O/T

    Just been listening to Mr Hunt on the Marr show.

    Trying to find more resources and funding?

    Try addressing all the waste that is there day in day out. My wife and I have been shuffling back to hospitals for the last two weeks and mainly due to infection after a major operation and being told in the first visit “it is only minor the body will fight it on its own”
    Twenty four hours latter told by an A&E Consultant very glad you did not leave this for another twelve hours. Then all the old chestnuts raise their ugly head about beds and trying to get the Consultant to come in over the weekend. All around you stories from others of their own individual experiences of a failure to get things Right First Time all the time.

    • Anonymous
      Posted October 29, 2017 at 1:14 pm | Permalink

      This is bang on topic actually.

      “trying to find resources and funding”

      It is not just houses that need to be built. It is not just a shortage of housing. It is a shortage of just about everything you look at.

      As usual it will be blamed on the old. And on that, where is Newmania ?

  34. Peter
    Posted October 29, 2017 at 10:20 am | Permalink

    Housing became a prime source of investment for many.

    In London the high end property market has been used as a sort of overseas safety deposit box. Foreigners buy apartments with no intention of living there, knowing their cash will be safe and they may also make a healthy return on their initial outlay. High end London property is also used to launder the proceeds of crime. Purchasers can and do hide behind the anonymity of an overseas trust. As the centre of London becomes too expensive, foreign speculators look further afield. Colindale is now popular with the Chinese, for example. Changes in stamp duty made cheaper properties more attractive to speculators too.

    Property prices have been allowed to become divorced from reality. The good old mutual building society used to lend around three times annual income. Such institutions were turned into profit chasing banks. Endowment mortgages were pushed and cost many purchasers dearly. In the USA housing became part of a racket for the banksters who bundled up dodgy debt and sold it on.

    The whole system is rotten to the core. Renters no longer have much in the way of council property to rely on either.

    • forthurst
      Posted October 29, 2017 at 3:04 pm | Permalink

      The building societies lent money from deposits and being mutuals, adjusted their lending and deposit policies to maintaining a balance of supply and demand, not in making profits. Banks operate on the basis of fractional reserve banking which means they actually lend money into existence and being profit seeking businesses, they want to lend as much as possible, hence the giddying loan muliples of salary which young people find themselves having to afford. As we saw in 2008, banks not only engaged in the merchandising of fraudulent derivatives but also lent out so much money that their reserve mutiples were 40 or more; they crashed and of course the taxpayer was obliged to bail out these parasites whose contribution to the real wealth of the nation is nugatory.

  35. Caterpillar
    Posted October 29, 2017 at 10:26 am | Permalink

    1. Obviously population growth is one part, but even if immigration is reduced in the future, the births to foreign born mothers (about 75% of U.K. births in 2015) will likely continue high for some time, and perhaps the tendency to larger families will continue for a number of generations.
    2. Comparison of U.K. to other EU countries in Table 3 and Table 1 of http://ec.europa.eu/eurostat/statistics-explained/index.php/Population_and_population_change_statistics UK’s population growth (%) has been between 200% and 30% of that of the EU as a whole.
    3. For more building UK needs more land with planning permission and an LVT such that the land isn’t just held.
    4. Artificially slowing the readjustment of house prices would continue the failed monetary policy of BoE and the misallocation of resources. The loss of confidence argument should not be applied as it simply continues to favour the confidence of the haves over the have nots. This misallocation will continue whilst real interest rates are so negative. The BoE can adjust this by raising the overnight rate a couple of percent now, or if it (wrongly) insists on going slowly a quarter of a percent each meeting for the foreseeable future (a year only adds 2%). Although there might still be cheap international money, the desired effect will still occur.
    4. Yes change of use should be supported, though (i) a quick capital gain needs to be effectively taxed – market distortions shouldn’t be ‘over’ rewarded (ii) the effect of business rates (and charity shops) in some areas where retail space is available needs to be considered.

    Overall UK seems to have run a short term monetary policy for too long (biasing investment decisions), a narrative of housing ladder (a positive feedback of belief this is where best returns and best storage of value occurs – a self-fulfilling pyramid, rather than resources flowing to businesses) and allowed population to grow despite distorting the capital growth (hence the ratio problem here). Monetary policy, land use, immigration, tax structure, community cultures – they seem to all be intertwined and all in need of reform. It is really not easy to see how this is going to happen.

    • Rien Huizer
      Posted November 2, 2017 at 12:21 pm | Permalink

      Pretty good comments. One point, BoE “short term policy”. Central Bank policy tends to be short term (the argument that CB policy influences long term growth/change is difficult although there is something to say for the argument that under rational expectations, efficient markets and neutral fiscal policy-whatever that may be precisely-, a central bank policy that provides either a stable money supply (whatever that may mean again) or a stable, upward sloping path for nominal GDP would be optimal. However, that could imply that central bank policy is on automatic pilot, which combined with a neutral fiscal policy would leave no space for discretionary policy, very much against BoE tradition. I guess that Carney himself leans towards a structure that minimizes political discretion and favours a more technocratic approach to handling large exogenous shocks and a close ao automatic pilot for episodes where shocks are not absent, but within acceptable range. But Carney is not alone, politicians want to have discretion in order to buy votes and markets want disturbances. Races where the best horse always wins are uninteresting for punters and bookies

  36. Richard Jenkins
    Posted October 29, 2017 at 10:47 am | Permalink

    And fifth, the green belt policy that prevents houses being built where people want to live, ie in cities and large towns.

    • Chips n egg wiv tea
      Posted October 30, 2017 at 12:09 am | Permalink

      The advantage of living in cities and large towns is…there are better odds at catching every variety of virus in Earth in just one public transport trip to work or school whereas in the countryside it could take a a whole season to get so much as a sniffle and a look-a-like bag of chips from McDonalds.

  37. graham1946
    Posted October 29, 2017 at 10:52 am | Permalink

    Your point about factory built houses is a good one and for years I have wondered at what seems to be a British obsession with building brick upon brick – it seems to me to be like coal mining with pick and shovel, totally outdated.
    ‘Pre-fabs’ is an unfortunate term from after the war, but the modern quality is superb, with higher levels of insulation, better quality control and aesthetically pleasing, as well as being quick to build and cheap and efficient to run heating etc. Coupled with the reckoned shortage of tradesmen, bricks etc it would seem to be a no brainer. Many new houses are suffering from build problems – are they building to lower standards because of time or skill constraints?
    Also put a stop to the latest builders wheeze of selling ‘freehold’ houses with leasehold land – it is a racket and soon such homes will be impossible to sell as people realise what is involved with ground rent typically doubling every 10 years and being yet another commodity to be sold to money men.

    • Stred
      Posted October 29, 2017 at 1:06 pm | Permalink

      The shell of a conventional brick wall is house or framed equivalent can be erected in weeks. Insulation can be etc is the same. It is planning and regs plus services that takes ages.

      • alan jutson
        Posted October 29, 2017 at 9:55 pm | Permalink

        Stred

        Agreed we designed and built our own house 38 years ago, two bricklayers and a labourer completed all the brick/blockwork (approx 15,000 bricks) from DPC level in 14 working days with all windows and door frames built in.

        • stred
          Posted October 30, 2017 at 12:51 pm | Permalink

          Same here. I put the joists in at night after the brickies went home. We were up to roof level 3 storeys up in 10 working days. The site clearance, foundations and drains took 6 months. Second fix 3 months. Services and finishes 3 months.

          • alan jutson
            Posted October 30, 2017 at 8:31 pm | Permalink

            stred

            Me too, I operated as an extra labourer to fill in where required and to load out on occasions, so they could start every morning with no delay.

            Skilled men cost money, and time is money, so you need to keep them fully loaded with materials and information whilst anticipating any possible problems.

            Bit too old to use a hod (properly) now !!!!

  38. JJE
    Posted October 29, 2017 at 11:35 am | Permalink

    Because the government doesn’t dare to let the market function properly and is artificially keeping prices high and enticing young people via Help To Sell to take on enormous debts to keep the whole Ponzi scheme afloat.
    Of course the longer this goes on the more painful will be the inevitable collapse.

  39. M.W.Browne
    Posted October 29, 2017 at 11:43 am | Permalink

    More immigration = more demand for houses = higher prices.
    This is how markets operate.
    More and more concreting over of our countryside, means creating an overpopulated hell on earth.
    Perhaps the young will like that.

    • Anonymous
      Posted October 29, 2017 at 1:18 pm | Permalink

      We did try to tell them with Brexit.

  40. Sue Doughty
    Posted October 29, 2017 at 11:48 am | Permalink

    Adapting properties in brown field places from commercial to residential use incurs VAT. Building new homes doesn’t. 20% of a lot of money is unaffordable to many.

  41. Sue Doughty
    Posted October 29, 2017 at 11:54 am | Permalink

    I see a scam whereby they say they have separated and one partner buys a different property and relocates to it. Does it up a bit and after 6 months they get back together and the other house is to be sold as their own residence for CGT. I notice the 6 months might not be long enough because sometimes it goes to rental instead.
    Separated but remaining good friends, or a CGT scam? The car is not there overnight. One family, two properties, means one is not available for sale to first time buyers.

    • libertarian
      Posted October 29, 2017 at 7:57 pm | Permalink

      Sue

      Really and how many people do you think are committing this scam? Isn’t it far more likely that the cause of a HUGE amount of housing need is a) The massive rise in single parent families b) the divorce rate of 42% meaning nearly half of all “families” live in two homes c) Healthier longer lives meaning more old people live alone in older larger properties. By the way most properties aren’t available to first time buyers because they can’t afford the deposit now that 100% mortgages are so hard to get.

  42. Roy Grainger
    Posted October 29, 2017 at 12:08 pm | Permalink

    Increase supply or reduce demand.

    Introduce penal capital gains tax on foreign-resident buy-to-let investors in residential UK properties – higher than the equivalent CGT rate on UK buy-to-letters. Letting Hong Kong and Singapore offshore investors buy property with 0% CGT is idiotic.

  43. behindthefrogs
    Posted October 29, 2017 at 12:20 pm | Permalink

    We need to concentrate on building affordable one and two bedroom properties. The council tax system then needs amending to encourage people living in under occupied properties to downsize. In the area of Wokingham where I live half of my neighbours have two or more empty bedrooms. We should start by reducing the single occupancy council tax discount for any property larger than band D to a lower fixed rate. We then need to remove the stamp duty on the purchase of any properties where the buyer is downsizing.

  44. Prigger
    Posted October 29, 2017 at 12:33 pm | Permalink

    The idea of building houses on brownfield sites doesn’t jump forward to when young couples’ children grow up a bit, get pregnant, need not just more housing but somewhere to work perhaps in a factory that would have been built on a brownfield site. Oh well, that’s several elections away hey?!! 🙂

  45. James Neill
    Posted October 29, 2017 at 1:00 pm | Permalink

    We need a radical overhaul in our thinking especially about transforming our city and urban areas planning into hubs of modern day living, we simply have to plan for a greater density of people to live and to work in built up areas while preserving as much as possible the character of many precincts and streets which are part of our country’s heritage. The existing combination of passive urban planning with private enterprise is not working, just look at the amount of living space above many retail premises that lies empty. What is also missing is an active urban planning and regeneration plan in many areas that involves the use of compulsory acquisition powers for major site assembly. We need fresh thinking on all of this if we are to bring into being the type of modern day housing units, and apartments suitable comfortable accessible to transport shops etc, and very importantly affordable going forward..otherwise it’s all talk..again

  46. Posted October 29, 2017 at 1:21 pm | Permalink

    Simple. Supply and demand.
    Something I learnt about in my first year at Grammar School about 70 years ago.

    • A different Simon
      Posted October 30, 2017 at 9:06 am | Permalink

      Degree of shortage does not explain why house prices get so high in areas of high demand .

      For instance prices of family homes in big cities are dependent on the amount of credit available to people – i.e. they tend towards everything a buyer can pay to service the debt .

      They end up spending their pension (or at least pension contributions) during their working life on mortgage interest and the principle of the loan .

      Only the banks and landowners benefit from this . Society would be better off if this money was allocated to infrastructure and financing new , innovative businesses which created new jobs .

      The writing is on the wall .

      If homeowners continue to vote for a party which props up house prices with low interest rates and help to sell policies , the young and disaffected will probably turn to extreme socialism from Corbyn or someone like him who will have no qualms about confiscating their wealth .

      • anon
        Posted November 4, 2017 at 11:38 am | Permalink

        Agreed.

        House prices are high because of government policies.

        That won’t change until the people behind the policies change or are changed.

        I like the idea of a true “LVT”.

        Why should interest on “thin air” bank loans not be paid directly to government.

        Banks should be paid fixed fees for their services , spread over the loan period.It should not be related to the loan size.

        If the loan defaults they lose the “unpaid fees”.
        Security taken for the loan would become government security and realised via a public auction mechanism.

        Money lenders should be allowed to retain interest on “share capital” or bonds obtained for that purpose.

  47. Embarristering
    Posted October 29, 2017 at 1:23 pm | Permalink

    A mirror set of behaviours of that of the PM and The Speaker has been and continues to be enacted in the UK. I am speaking of HR and managements conducting quasi-police investigations, collecting written and oral “evidence” under no legal framework for doing so, and quasi court trials of their staff. They have got away with it. Have not been subject to prosecution for having the temerity in practice of impersonating in the widest sense police officers and conducting kangaroo courts.
    The PM and Mr Speaker should made an example of. It will act as a long-awaited deterrent to bosses, trade union officials and lowly supervisors throughout industry in falling foul, actually, of already existing law for the protection of our citizens.

    • rose
      Posted October 29, 2017 at 7:01 pm | Permalink

      Well what can you expect from a PM and a Speaker (and a Home Secretary too for that matter) who believe in the concepts of Hate Crime and Hate Incidents?

  48. Peter
    Posted October 29, 2017 at 1:25 pm | Permalink

    My local paper reports on new ‘affordable homes’ in Kingston upon Thames. One bedroom places selling at £256,000 which is apparently 20% below the market rate.

    Affordable? Well they are targeted at ‘middle earners’. This is defined as those earning less than £90,000 per annum.

    That will not be much help to those nice ambulance people I had to call out a few weeks ago, or firemen, or many other decent people who are average earners.

  49. ChrisS
    Posted October 29, 2017 at 1:27 pm | Permalink

    My apologies for this longer than normal post but, as a retired IFA, I have spent more than 35 years arranging investments and mortgages for private clients. I have seen many changes in the pension and housing market instituted by governments but hardly any of these have been helpful. Government needs to interfere less in the housing market. When they do, they do so at their peril.

    Firstly, Government needs to remember that we have a different view of home ownership in the UK compared with other countries.

    The overwhelming proportion of home owners regard their home as their most important investment providing security for their retirement. That is more important than ever as it is now all but impossible for those under 50 to fund an adequate pension or end of life care. There is simply no realistic possibility of the state adequately providing these essential services. Taxpayers certainly should not be asked to fund these when there is a readily available source of cash in the family home.

    If we look at other countries, low house prices do not increase home ownership. In France, for example, nobody expects to make money on their home, in fact, house prices outside Paris have plummeted in the last decade. So much so that younger people who could easily buy a property at today’s low prices shun owner occupancy and choose to rent, even though rents are much higher than mortgage repayments. German people are in a similar situation. Crucially, in both countries, the cost of buying and selling is even greater than here.

    In the UK the attitude that our home is an investment is deeply ingrained. If the government was to engineer a fall in house prices of, say 10% or more, that would have a dramatic effect on consumer confidence just at a time when growth in the economy is absolutely essential. We need no more than a short term standstill in house prices to allow incomes to catch up a little. However this in itself will not make home ownership amongst the young more attractive.

    We have seen a changing pattern of lifestyles in the last two decades. My wife and I have two sons in their early thirties. They are both doing well but their lifestyle makes home ownership too inflexible. The answer for them to be on the housing ladder would be buy-to-let while continuing to rent themselves. It is scarcely believable that two successive Conservative Chancellors have done everything they can to drive private landlords out of the market in the mistaken idea that this will encourage more home ownership. It won’t.

    The way to encourage more home ownership, particularly amongst the young, has to be a total revamp of the way the housing market operates. The aim should be to make the sale and purchase of a home no more difficult or expensive than signing up to purchase a new car on a PCP deal.

    The market place is already changing thanks to the internet – the end is in sight for the traditional and expensive estate agent model. This is already dramatically cutting the costs of selling. However the changes to the process need to go much further :

    The good news is that means of accomplishing this is entirely within the control of the Government. This is because stamp duty rates, the land registry, Solicitors and the mortgage providers are ultimately all regulated by ministers.

    Time and therefore cost could easily be taken out of the selling process by there being a secure electronic file like a passport created for every property as it comes up for sale. This secure passport can then be immediately available online to anyone whenever the property comes back onto the market. HMRC would be happy because ultimate ownership would be visible on the file. Only the amount of the mortgage need be hidden.

    Simplifying the mortgage system will reduce costs and time dramatically. Expensive up-front mortgage fees should be banned. These up-front fees can be 1-3% of the loan and removing them will lessen the profit centre that mortgage issuing has become.

    The Treasury has insisted that regulators tighten mortgage lending criteria in recent years. This was unnecessary because repossessions were already at an all time low. All it has accomplished is to increase transaction costs and exclude millions from the market. Even something as simple as missing one credit card payment while on holiday is now enough for some lenders to exclude an applicant. Tightened criteria makes it all-but impossible for the self employed to get a mortgage.

    Then of course we have the iniquitous stamp duty which makes it all but impossible for older people to move home. This and the 3% second home tax has done more damage to the housing market than anything else. Hammond and Osbourne should be ashamed to call themselves Conservatives for increasing the rates so much.

    These changes might mean that the legal profession lose a lot of jobs in the short term but the increase in transactions would create even more employment elsewhere.

    Young people would then be encouraged to buy rather than rent because the cost and difficulty of moving will make ownership more compatible with today’s more flexible lifestyle.

    • Man of Kent
      Posted October 29, 2017 at 6:18 pm | Permalink

      Chris S
      An excellent post ,particularly about older people moving home !

      I just don’t want to move home as this means living in smaller rooms , I could do with fewer rooms now but while I can still keep up the maintenance of the property I will stay put .

      The costs of changing house are so high and merely result in a lower net worth which I/wife may need for care home costs otherwise it’s money down the drain .

      • alan jutson
        Posted October 30, 2017 at 7:38 am | Permalink

        M o K

        Your point is why many do not downsize, they like the feeling of space, who wants to live in thy cell like conditions of new properties.

        • Man of Kent
          Posted October 30, 2017 at 2:08 pm | Permalink

          Exactly !

    • libertarian
      Posted October 29, 2017 at 8:03 pm | Permalink

      Chris S

      At last someone talking common sense. Thank you for a well thought out, argued and excellent post. You are entirely right

  50. Fedupsoutherner
    Posted October 29, 2017 at 1:35 pm | Permalink

    I live in Scotland where compared to England the population is low and immigration comparatively low too. We have a lot of spare land. House prices are low as are rents. No shortage of housing and a lower rate of immigration plays a big part in the housing crisis. Simple!

  51. Posted October 29, 2017 at 1:43 pm | Permalink

    You say “in order to bring potential supply and demand into better balance the government does need to make progress with a new migration policy.” I’m not aware that we’ve been told about any new migration policy – either potential or actual – any more than we were told about the last policy on population replacement by migration, which finally emerged in a March 2000 UN discussion paper.

  52. Mr Obvious
    Posted October 29, 2017 at 1:46 pm | Permalink

    Many people get mortgages. They shouldn’t.

  53. Posted October 29, 2017 at 2:03 pm | Permalink

    Why are house prices so high?

    Why are Train Journey prices so high?

    Why are energy prices so high ?

    Why are wages so low ?

    The list is endless. Everything Thatcher introduced has been a complete and utter disaster for the majority.

    We were sold an ideological fraud.

    • Anonymous
      Posted October 29, 2017 at 5:58 pm | Permalink

      Well pick your point in history, why don’t you. Mine is under Major and the signing of Maastricht.

    • rose
      Posted October 29, 2017 at 7:05 pm | Permalink

      She didn’t introduce out of control immigration. In fact she kept a firm lid on it.

    • libertarian
      Posted October 29, 2017 at 8:08 pm | Permalink

      Derek Henry

      Your post has been entered in the deluded thinker category, we are sure you’re onto a winner with that drivel

      The answers to the question you ask ALL have the same answer none of them Thatcher

      Answer
      Stamp duties, taxes , govt policy

      Taxes, fuel duty government policy

      Taxes fuel duty government policy

      wages are rising but slowly due to….yep you guessed it the cost of government. The cost of employment in taxes, duties and new schemes has risen 12%

  54. Rien Huizer
    Posted October 29, 2017 at 2:04 pm | Permalink

    Given inelastic supply (maybe you should expand this post to include the reasons for relatively low price elasticity of UK supply, which I suspect may be related to ( ia) opportunities for land hoarding) house price buoyancy in a country with population growth should be no surprise. With low interest rates and homogeneous approval standards across the mortgage banking system, price rises are natural when there is still growth in household formation, immigration and last but not least sizable internal migration (house prices in general in the Northern part of the country are either stable or vulnerable, possibly due to the flip side of the marginal demand (internal migration driven) that propels prices in the south.

    These problems demand a variety of measures and simplifying construction should be one of them. However, making land hoarding (beyond a certain point) punitively expensive may have merit too. A “use it or lose it” system combined with a planning permission system where land owners would be required to bid in auctions for actual construction and marketing permits with a limited life might release a lot of new construction quickly and result in supply increases at short notice, and especially so if more efficient/ industrial methods were used. Politically speaking this might be problematic. Not only given the influence of developers at various levels of the political system, but also given the vested interest of existing homeowners and their bankers, in stable/rising prices. House prices are a very important variable in monetary policy design and a maybe already vulnerable market (very high loan/income rations, increasing loan/value ratios and limited capacity for households to absorb a general rise in mortgage payments) simply reduces the policy space available to the BoE. Just imagine a Brexit outcome 18 months from now that would see the Pound cross USD parity and go over EUR 110. Would the BoE maintain low interest rates? How far would rates have to rise? It is not the most likely scenario but certainly one that should be part of contingency planning. All in all then, I would be careful with expanding supply (but remove impediments to proper market functioning) and certainly aim for a soft landing of the mortgage market. First time buyers should have some patience…

  55. John
    Posted October 29, 2017 at 2:29 pm | Permalink

    Even once you stop all migration, their will still be a shortage of housing stock for many years to come. Although we may start building 40000 each year, how many do we demolish each year?

    With wages only being held up by the minimum wage, and food prices increasing (not necessarily obviously) but packet sizes are going down and the costs per package flat lining.

    For the company I work for the accounts/import/export department thing are looking good. But having purchased new equipment to expand production, we have now shipped this equipment into mainland Europe, rather than use it here and export. Cost wise this is neutral, as it was cheaper to manufacture here but obviously costs more to ship. But if we have to a regime such we have with the rest of the world, it will be cheaper import the 10% we need rather than the 90% used on the mainland. But that is progress!

  56. Denis Cooper
    Posted October 29, 2017 at 2:39 pm | Permalink

    Off-topic, I saw Hilary Benn on TV waxing indignant that MPs might not be able to have a meaningful vote on an EU exit deal if it had already signed by the government.

    So I decided to refresh my memory on when he had succeeded his father, grandfather and great-grandfathers as a quasi-hereditary member of the House of Commons.

    I find that he won a by-election in June 1999, so too late to participate in what would have been a series of meaningless votes on the Treaty of Amsterdam which had been signed by the Labour minister Douglas Henderson on October 2nd 1997 and had come into force on May 1st 1999 without MPs being able to change as much as a comma.

    But he was in the House to participate in all the meaningless votes on the Nice Treaty, which having been signed by Robin Cooke on February 26th 2001 was duly approved by MPs without them being able to change as much as a comma even if they wanted to, which as far as I can tell did not bother Hilary Benn or any other Labour MPs who may now have belatedly discovered the paramount value of parliamentary sovereignty.

    Then there was the Lisbon Treaty, by which time he was a minister urging MPs to vote for a treaty which had been signed by Gordon Brown and David Miliband and then dumped down on MPs as yet another fait accompli, as they could not change as much as a comma of that treaty even if they wanted to; and in particular of course they could not decide that the voluntary withdrawal clause being introduced by that amending treaty, now Article 50 TEU in the consolidated versions, was badly worded and needed to be improved.

    There were parliamentarians who objected to this way of proceeding with EU treaties, for example Lord Garel-Jones in 1998:

    https://publications.parliament.uk/pa/ld199798/ldhansrd/vo980216/text/80216-11.htm

    “Parliament is invited to debate and discuss the treaty without being able to amend a single dot or comma.”

    “Therefore, it is quite important that Parliament … begins to address ways … by which Parliament itself can be much more closely involved with the Executive in the negotiating process so that we do not find the Executive coming to a British Parliament with a three-clause Bill and saying, “You can debate the Bill and talk about it as much as you like but you cannot amend it or alter it by a single dot or comma”.”

    As far as I am aware, Hilary Benn was never one of those parliamentarians who objected and said that ministers should not sign a treaty furthering EU integration and just present that to Parliament for approval as a fait accompli, it is only now that the agreement would be in the opposite direction that this hypocrite is cutting up rusty about it.

    • rose
      Posted October 29, 2017 at 7:10 pm | Permalink

      As Richard Drax MP said to these people: “Where were you when…?”

  57. Optimist
    Posted October 29, 2017 at 2:59 pm | Permalink

    Ms Soubry has been working feverishly in her TV Constituency today, again.. Banging on about “investigations”, Parliament and workplaces “throughout the land”. There actually isn’t a fine line between workplace based “investigations” and the outer world because it isn’t “outer” and the workplace isn’t “inner” as some people mistakenly believe. She is said to have had legal experience and training. Not enough. We all hope she continues not watching her step and not keeping it brief.

    • rose
      Posted October 29, 2017 at 7:13 pm | Permalink

      And all the while the PM is quietly selling her country down the river – or rather paying for it to be taken down the river. Where are the investigations into that? Including into her running down our defences while building up the EU’s? And what is she doing about our fishing grounds? It looks as if they will be given away as well – or rather we will pay for them to be taken away.

  58. ferdinand
    Posted October 29, 2017 at 3:07 pm | Permalink

    I think your analysis of the four causes of excess demand is correct. Of course QE has been coupled with low interest rates as the Keynesian tool. My concern is that whenever government interferes in the market the response is usually an excess of supply or a heavy fall in demand. Whatever, the opposite to the intention occurs.

  59. Denis Cooper
    Posted October 29, 2017 at 3:22 pm | Permalink

    Also off-topic, an interesting article by a historian here:

    http://brexitcentral.com/does-brexit-mean-cliff-edge-more-shallow-pothole/

    “Does Brexit mean a “cliff edge”? More a shallow pothole”

    “For historians, the picture looks a little different. If we compare any single year with its neighbours, acceleration and deceleration are real enough. But compare one decade with another and a different picture emerges. Indeed if we look at Office for National Statistics figures for the year-on-year growth of the UK’s GNP from 1949 to 2016, booms and busts make little difference to longer-term trends. Macmillan’s consumer bonanza; disengagement from empire; entry into the EEC; the miners’ strike; Thatcherism; Blairism; globalisation: these things produced, at most, modest effects.

    Background noise apart, UK GNP since 1949 has grown at about 2.5 per cent per annum, irrespective of the party in office, regardless of geopolitical events (but with slightly higher figures in the two immediate postwar decades) … ”

    As mentioned from time to time, it is a matter of either unthinking, or else deliberately deceitful, routine for ideological supporters of the EU to vastly exaggerate its economic effects, which have not only been marginal but quite possibly negative.

    • Chris
      Posted October 29, 2017 at 5:09 pm | Permalink

      Related to your comments on exaggeration, has Mr Redwood seen the article by Booker (based on R North) in the Telegraph basically arguing that the” terrible brexit prophecy of Ivan Rogers is coming true”? There has to be a swift response by government to this i.e. your rapid response/rebuttal unit, Denis. I believe Booker and North have done huge damage to the Brexit cause and that Brexit ministers in government ignore them at their peril. R N makes no secret of his apparently many contacts with key politicians and civil servants trying to promote his Flexcit option.

      What RN seems to refuse to recognise is that one of the key reasons that many Leavers voted for Brexit was in order to control immigration in order to manage provision of resources, such as housing, and to prevent such huge pressures on infrastructure that continued mass immigration has caused. I believe the key reason to Leave was to gain control by regaining sovereignty, and RN’s Flexcit does not appear to give us that. We would still be subservient to the EU in many key areas, and be in a halfway house type position, which in turn would be relatively easy for Remainers to reverse and get us back into the EU. RN undoubtedly has in depth knowledge, but he only seems to be able to see solutions in terms of economics, and apparently fails to take account of political solutions which address the key issues for Brexiteers i.e. he is simply not a politician, and therefore it is hardly surprising that he advocates a different solution, being apparently ignorant of, or unwilling to take account of, political/human factors.
      http://www.telegraph.co.uk/news/2017/10/28/terrible-brexit-prophecy-ivan-rogers-coming-true-should-have/#comments

  60. ian
    Posted October 29, 2017 at 4:36 pm | Permalink

    What you need is a two tier market for buying houses, the normal one which we have now back up by a social one, which acts as a ladder up to buying a house in the normal market as their job and pay improves. How can this be achieved, by the council, gov, and housing association retaining the value of the land, which in turn is about 33% of the cost of buying a freehold property in the normal market, depending on the location of the property, like London you might pay 50% of the land price, and other areas, 25% of the land price.
    Then who are you building for, 2 million people in temporary accommodation who live in hotels that cost loads of money to the taxpayers, just first time buyers or a free for all including overseas buyers?. By controlling the land, you control who can buy the property with the price to buy always being cheaper than in the normal housing market for first time buyers and people living in temporary accommodation. You can write what you like into the freehold or leases but give the buyers the right to alter the properties to what they want at their own expense as in the normal housing market.
    How to raise the money when you have no money, and what type of housing to build and where?. I have always thought that the money should be raised from holiday lets who receive 9 billion a year back from the government, but this does not go down well because most of the owner of this type of property is owned by MPs, lords, farmers and rich people and do want to be out of pocket. So taking that into account I thought to redistribute the money for three years which would raise 27 billion pounds and give them back all of the money starting after the second year over a period of 7 years, and give gov time to raise money so no one will be out of pocket, money wise, most of the money will come back in as the property are sold to the normal market and the social market to be able to pay them back.
    Where to build, well the councils and home builders would know best and should think about swapping land between themselves to come to the best outcomes for themselves and people.
    What to build, you need everything in the social market and the normal market, flats, terrace houses, semi-detached and detached houses, I don’t think anybody wants to go back to the sixty and just build tower blocks of flats because of it cheap, spending more is always better in the long run.

  61. Hangman
    Posted October 29, 2017 at 4:55 pm | Permalink

    Sky News stated minutes ago they had contacted the PM Office to ask it whether it was okay to investigate a certain Minister according to their own ministerial code when the alleged event took place allegedly before the person was a minister and therefore not subject by their own rules and not necessarily that of the law of the land to their code. It seems the PM Office refused to comment. Has the cat got their tongue? Or, a Court got their tongue?Or a Judge got their tongue? Or are they just plain dumb?

  62. Na
    Posted October 29, 2017 at 5:15 pm | Permalink

    Do NOT buy a house with a mortgage. Either buy it outright or live within your means.

  63. Miss Brandreth-Jones
    Posted October 29, 2017 at 5:27 pm | Permalink

    Perhaps we could claim more land from the sea, as in the Fens , then build large dykes to prevent flooding. Little Netherland. The UK already has its own Atlantis , bring it back and build.

  64. PaulW
    Posted October 29, 2017 at 7:31 pm | Permalink

    We need someone to come up with a cheap no frills type of home building just like ryanair and easyjet introduced into the airline market to undercut the established market. Government if it wanted could be the instigator of this by buying and releasing state and council owned lands onto the market at low cost, also by passing laws to hurry up the planning process and also allowing new laws for the compulsory purchase of land and old disused properties etc etc– but it won’t because it’s a tory led government so theres little point in discussing.

  65. Simon Coleman
    Posted October 29, 2017 at 9:21 pm | Permalink

    High house prices have very little to do with immigration. Demand has been high for a very long time, far outstripping supply. Most immigrants rent, as studies have shown. It’s the huge foreign capital coming in, especially in London, that’s a far bigger factor than the arrival of people. Once again, you have to find some way to make a case against immigration – or in fact make up a case out of negligible evidence.

  66. ian
    Posted October 29, 2017 at 11:30 pm | Permalink

    Cost of building social housing by way of retaining the land. Most councils and housing associations already own the land as well as the government, getting land to build on is not a problem, getting it in the right area is, that why swapping land should be considered with homes builders for social housing in towns and cities. Now to build property is about same costs all over the country for materials & labour apart from London and bigger cities where labour will be a little bit more. Now if you call in outside builders, that is going to cost more money because of the need to make a profit on each property. where you can save money is buying the materials at cost prices from overseas to build with, including flat pack homes.
    That because you have not got the materials here to do the job, even the brick factories want to shut down because of energy prices, and no one is going to open new one because it not worth their while for the amount time they will be needed for, even the gravel and sand pits, which you will need a lot more of pits to open, but companies here will think twice before opening more because of regs costs and running their businesses down in a small space of time and having to look for new pits which take years in the planning process and that if they can find new one’s, then glass, you have not even got a glass factory to make glass, because of high energy costs.
    Politicians make me laugh, they sit around talking BS on everything apart from new laws on what you can say or do, they should be called the thought police/ 300,000 new homes a year, maybe 300,000 rabbits hutches a year, made out of old tyres. No, the majority of materials will have to be imported and workers trained here because of the shortage of housing now. Cost of one bed flat at cost price 35,000 pounds, with profits going to a builder, 50% more, add on one bedroom, not a lot more. One detached house, 4 by 2 110,000 pounds with profit for build 180,000, flat pack houses are cheaper when buying in bulk. The logistics for this sort of operation are mind-blowing. Housebuilders should be left alone, they are running businesses in the share market and their business model depends on their share price and banking land is what makes their share price, not building houses, without the land bank and cash or borrowing power to buy more land when prices go down, housebuilders are worthless. If you give them the land they might train a few more people to build houses but only about another 30,000 or so, If gov wants 300,000 a year extra homes you will find that you’re on your own mate.

  67. Prigger
    Posted October 30, 2017 at 2:23 am | Permalink

    One finds unfortunately, in some women propelled by their obvious and demonstrated intelligence and ability to leading positions of state that they progressively have less and less regard for the normal human desire of proof in any accusation made by one or more of their own gender in regard to males. It is if the accusation is proof itself. In this connection it is astoundedly common for a female politician cross -party on TV ( many examples ) to say without a glimmer of intelligence and morality “Not enough men accused of rape are found guilty” I do not know if women, generally, are worthy of the highest positions of authority. So far, their track record as a self-declared group, says no.

  68. lojolondon
    Posted October 30, 2017 at 11:17 am | Permalink

    1. Cut immigration ‘to the tens of thousands’. This means legal migration and illegal migration that seems to be so well-tolerated by our supine authorities. This should reduce demand by at least 100,000 houses per annum, probably more.
    2. Cut tax and ‘stamp-duty’ for landlords – a hopelessly anti-conservative and anti-house-building measure taken by our last chancellor, and as far un-mentioned and un-actioned by the present one. This encourages people who have money to supply homes for people who do not, at the same time ensuring an inflation-proof pension for the home-provider.

    There you have it – reduced demand and increased supply in two easy steps, and thousands of investors lifted out of the pensions trap into the bargain. Simples.

  69. John Griffin
    Posted October 30, 2017 at 11:28 am | Permalink

    I can remember (just) buying my first house on getting married. Most young people got married before or as they were bought a house. In those days, the 1960’s, you had to save with a Building Society for a period of months before being offered a loan. Then the Banks got involved and started lending more easily. Then the most disastrous decision was made, when two salaries were combined to allow mortgage borrowing – up til then only one salary counting obviously kept some control on house prices. Immediately two salaries were allowed house prices shot up and have not stopped rising. I think it was Nigel Lawson who allowed this.

  70. peejos
    Posted October 30, 2017 at 6:57 pm | Permalink

    Can I offer a different angle ~ that of personal avarice? Getting on the housing ladder is not driven by fear of missing a current bargain but the chance of making an ultimate and possibly enormous profit. Immediately post war street after street had ‘For let’ signs scattered along them which was accepted as the norm. The advantage of flexibility to follow jobs helped the economy and the need to build up a deposit before applying for a mortgage non existent, reducing the stress of the early years of marriage. Nowadays the MSN constantly describes the multiple increase in house prices. A house should be a place to live in, in the same way a car is a vehicle to travel in, not something to make a profit out of ~ who buys a car expecting to sell it at multiples of its original price?

  71. a-tracy
    Posted October 30, 2017 at 8:40 pm | Permalink

    Just watched Dispatches, where were our Cheshire Tory MPs, letting Burnham and the Barnsley MP do the running is failing politics John and frankly we’ve had enough of it with a second generation of our brightest and boldest children moving South you’re just failing us. Sandbach, McVey, Brady, Rutledge, Bruce invisible support for the Northern Powerhouse and you wonder why you lost Crewe, Chester, Warrington x2, Weavervale – many good Tory MPs but all supporting southern dominant conservative government decisions. We are disconnected, why aren’t our MPs asking why our hospitals aren’t connected by trams, trains,etc. Why don’t we have cheap Northern Oyster cards, why aren’t any of our large institutions connected up on transport networks or our big employment sites. Our MPs spend so long living in London themselves they forget about the people they represent and our stagnant house prices, emptying Cities and lack of entertainment we want, do you think that tv Northern based soap operas will keep us entertained for another decade!

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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