August 14, 2023 - 7:00am
Recent statistics released by both the official census and Zoopla show that more young people are giving up on buying property than ever before. Around 51% of people in England and Wales between the ages of 20 and 24 are opting to live with their parents, a seven-point increase on similar figures collected in 2011. More than 10% of people aged 30 to 34 are also living with their parents, up from 8.6% in 2011.
The fact that the comparison is being made to 2011 is interesting. Back then, property prices had not yet recovered from the bursting of the bubble in 2007-08 and were almost 12% below the peak. Today, house prices are 73% above their 2011 levels, so it is no wonder that more young people are opting against moving out.
These numbers alert us to a fact that is not widely discussed when people talk about the housing crisis in Britain: the market is highly cyclical. Prices do not constantly rise. Rather, they go up and down, typically in line with the economic cycle. When the economy is growing, prices rise; when it slides into recession, they fall.
This cyclicality suggests that the question of the housing crisis is much more complicated than simply being a case of restricted supply — a constant refrain of the politicians and the building lobby.
Take, for example, vacancies. In 2022 there were 676,304 vacant dwellings in England. This number has increased by over 86,000 since 2013, when house prices were lower. These are enormous numbers. Data shows that in 2022, 204,530 dwellings were built in the entire UK. This means that the number of vacant dwellings in England alone is equivalent to over three years’ worth of building.
If this is a supply-side crisis, it is a rather odd-looking one. The reality is that Britain does not suffer from a housing shortage: rather, housing is currently too expensive because it is treated as an investment asset.
This is why the price fluctuates with the business cycle. When confidence collapses, so too do prices. Confidence in turn is driven by the Bank of England’s monetary policy, which impacts the housing market directly through its influence on mortgage rates.
Indeed, prices are already falling due to rising interest rates. Eventually the fall in these prices will lead to a collapse in construction employment and this will lead the economy into recession. Then, the debate will turn away from high house prices and towards unemployment. Headlines will tell us that young people are living with Mum and Dad not because of unaffordable housing, but because they cannot find work.
If all this seems remarkably familiar it is because similar occurred during the last recession in 2008-09. The problems presented by the overly financialised economy in which we live render us like Sisyphus. We roll the rock up the hill, discussing housing in the boom and unemployment in the bust. But when one of these problems is solved, the other pops back up — after all, it is simply the reverse side of the coin. And so the rock rolls right back down the hill again.
We can never get a grip on these issues because they present a moving target. Since politicians and policymakers are convinced that the problems are caused by housing supply, they never even try to get to the root of the problem. The philosopher Friedrich Nietzsche once asked whether a man could be happy to repeat the same life repeatedly. In Britain, we don’t seem to get a choice. Our economic problems are an eternal recurrence of the same.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeYou know those Supply and Demand graphs you find at the front of any and every Economics books – from a “Beginner’s Guide” through to the work of Nobel laureates? They’re there for a reason.
Supply and demand is not merely a whim, that can be ignored in favour of some more ideologically appealing argument. It works. It describes the realities of the situation and is the foundation and fundamental principle of economics. If you tamper with it, seek to control it or otherwise get in the way of it then there will be a downside. Artificial reduction in the price of something will cause demand to rise, supply will fall, and there will be a shortage.
The market price of something is the market price. If you wish to reduce that price then you must either lessen the demand or increase supply.
Pointing to vacant houses in the parts of the country that nobody wants to live is not a refutation of that observable fact. You list vacancy totals, but don’t break it down geographically. In the South East there are very few long-term vacants, because there is massive demand and little supply.
Any sensible economist, politician or just anyone at all acquainted with how things actually work could tell you that if you wish to see lower house prices/rents then you have two obvious options: you’d better build more houses for people to buy/rent or reduce the number of people looking to buy/rent them.
The latter option is anathema to the Guardian and leftish economists who, despite the mountain of evidence to the contrary, still insist that there doesn’t need to be any curbs on the number of people.
At the risk of upsetting the pachydermaphobes – why do so many refuse to recognise the fairly large and obvious elephant in the room?
Net migration to the UK stood at 662,000 last year. Another record. Each year the calculations have to be revised upwards to factor in the new realities. So much so that the Department for Communities and Local Government official projections about the future growth in the number of households in England hasn’t been published since 2017. Back then they noted that if net migration to England was to continue at 233,000 a year (it had averaged 208,000 for the previous ten years), then 240,000 new homes needed to be built each year for the next 25 years to keep up with demand, 45% of which would be due to future migration.
They stated that to meet this demand, we would need to build one home every five minutes (day and night) just to house future migrants and their children. The problem is now considerably worse.
Guardian columnists and the BBC refuse to accept that immigration has had any negative impact on housing but if you take immigration figures and add to those the children born to immigrants you will find that fully 82% of the population increase since 2001 has been due to immigration.
So, if 82% of the increase in population has been related to immigration how can anyone possibly suggest that immigration has nothing to do with it?
If there is a housing crisis, and you add several million people to the population do you think that it:
A: Helps the situation?
B: Worsens the situation?
C: Has no impact on the situation?
(If you think options A or C are true then I have some magic beans I’d like to sell you.)
Immigration has had an enormous impact on Britain, much of it positive – but to pretend it has come at no cost – or that the rise in population due to immigration has had no negative impact on the housing shortage – is ludicrous.
It is impossible to find an effective solution when ideology blinds you to an obvious cause of a problem.
All true Paddy except that the pre-2021 figures for immigration are bogus, they are not counts, just guesses based on questionnaires given out to a sample set of people arriving on flights to Britain. While we were in the EU, we had an open border with 400M people and have no idea how many arrived or how many stayed.
Given that births have not reached replacement rate since the early 1970s but according to the census returns our population grew from 60M to 68M between 2005 and 2022 (since the first, A10, EU expansion Eastwards) we can guess that immigration averaged about 400K per year in those years.
So the housing demand is greater than you make out!
And yet, if you compare household formation to housing completions between the 2011 and 2021 censuses, house building outstrips formation (even including migration).
I’m not saying that migration isn’t a major factor in driving the need for housing – it is and if there weren’t any migration, our population would be in decline because the birth rate is below replacement (which itself may be a function of how expensive it is for younger households to acquire a stable home). But surely we should be designing a housing system for the population we have rather than the population that we would have under some other set of political circumstances.
My point (see my other comments) is that it would be perfectly possible to design a housing policy that accommodated the current reality of migration and therefore ensured that current levels of migration did not impose this cost. If we wanted to. Now you may think that we should control migration for other reasons and that’s OK. But the failure of housing policy and immigration policy are (or can be) separated.
Mr. Pilkington is correct. “Supply-and-demand” is far too simplistic to describe the dynamics of human interactions like buying and selling; especially about something as emotionally fraught as houses.
It’s a shame that we’re all stuck under the thumb of the economists; who can’t even make an effort to deal with the obvious flaws in their centuries-old theory.
This was better than the article!
Whilst I agree, I think Pilkington is correct in that with housing it doesn’t tell the whole story.
I don’t have the figures for the UK, but I now live in New Zealand which has horrendous property prices. In 1990 the median house cost 4x the median salary, whereas today it’s around 13x, yet the number of dwellings per capita is almost exactly the same as it was 30 odd years ago. What has happened is that due to weak tenancy laws and a lack of capital gains taxes, an ever increasing percentage of the housing stock has been bought by landlords and investors who have been able to outbid first time buyers due to having equity from the rising house prices (as well as not having to worry about servicing the mortgage as it will all be paid by the tenants anyway).
So whilst the housing stock is where it should be, the market has been badly manipulated to keep prices high
I stress the fact that if you believe there isn’t enough housing, there is a significantly bigger problem with not enough affordable housing. Leaving families struggling with the only choice they have …expensive house or no house..
All true Paddy except that the pre-2021 figures for immigration are bogus, they are not counts, just guesses based on questionnaires given out to a sample set of people arriving on flights to Britain. While we were in the EU, we had an open border with 400M people and have no idea how many arrived or how many stayed.
Given that births have not reached replacement rate since the early 1970s but according to the census returns our population grew from 60M to 68M between 2005 and 2022 (since the first, A10, EU expansion Eastwards) we can guess that immigration averaged about 400K per year in those years.
So the housing demand is greater than you make out!
And yet, if you compare household formation to housing completions between the 2011 and 2021 censuses, house building outstrips formation (even including migration).
I’m not saying that migration isn’t a major factor in driving the need for housing – it is and if there weren’t any migration, our population would be in decline because the birth rate is below replacement (which itself may be a function of how expensive it is for younger households to acquire a stable home). But surely we should be designing a housing system for the population we have rather than the population that we would have under some other set of political circumstances.
My point (see my other comments) is that it would be perfectly possible to design a housing policy that accommodated the current reality of migration and therefore ensured that current levels of migration did not impose this cost. If we wanted to. Now you may think that we should control migration for other reasons and that’s OK. But the failure of housing policy and immigration policy are (or can be) separated.
Mr. Pilkington is correct. “Supply-and-demand” is far too simplistic to describe the dynamics of human interactions like buying and selling; especially about something as emotionally fraught as houses.
It’s a shame that we’re all stuck under the thumb of the economists; who can’t even make an effort to deal with the obvious flaws in their centuries-old theory.
This was better than the article!
Whilst I agree, I think Pilkington is correct in that with housing it doesn’t tell the whole story.
I don’t have the figures for the UK, but I now live in New Zealand which has horrendous property prices. In 1990 the median house cost 4x the median salary, whereas today it’s around 13x, yet the number of dwellings per capita is almost exactly the same as it was 30 odd years ago. What has happened is that due to weak tenancy laws and a lack of capital gains taxes, an ever increasing percentage of the housing stock has been bought by landlords and investors who have been able to outbid first time buyers due to having equity from the rising house prices (as well as not having to worry about servicing the mortgage as it will all be paid by the tenants anyway).
So whilst the housing stock is where it should be, the market has been badly manipulated to keep prices high
I stress the fact that if you believe there isn’t enough housing, there is a significantly bigger problem with not enough affordable housing. Leaving families struggling with the only choice they have …expensive house or no house..
You know those Supply and Demand graphs you find at the front of any and every Economics books – from a “Beginner’s Guide” through to the work of Nobel laureates? They’re there for a reason.
Supply and demand is not merely a whim, that can be ignored in favour of some more ideologically appealing argument. It works. It describes the realities of the situation and is the foundation and fundamental principle of economics. If you tamper with it, seek to control it or otherwise get in the way of it then there will be a downside. Artificial reduction in the price of something will cause demand to rise, supply will fall, and there will be a shortage.
The market price of something is the market price. If you wish to reduce that price then you must either lessen the demand or increase supply.
Pointing to vacant houses in the parts of the country that nobody wants to live is not a refutation of that observable fact. You list vacancy totals, but don’t break it down geographically. In the South East there are very few long-term vacants, because there is massive demand and little supply.
Any sensible economist, politician or just anyone at all acquainted with how things actually work could tell you that if you wish to see lower house prices/rents then you have two obvious options: you’d better build more houses for people to buy/rent or reduce the number of people looking to buy/rent them.
The latter option is anathema to the Guardian and leftish economists who, despite the mountain of evidence to the contrary, still insist that there doesn’t need to be any curbs on the number of people.
At the risk of upsetting the pachydermaphobes – why do so many refuse to recognise the fairly large and obvious elephant in the room?
Net migration to the UK stood at 662,000 last year. Another record. Each year the calculations have to be revised upwards to factor in the new realities. So much so that the Department for Communities and Local Government official projections about the future growth in the number of households in England hasn’t been published since 2017. Back then they noted that if net migration to England was to continue at 233,000 a year (it had averaged 208,000 for the previous ten years), then 240,000 new homes needed to be built each year for the next 25 years to keep up with demand, 45% of which would be due to future migration.
They stated that to meet this demand, we would need to build one home every five minutes (day and night) just to house future migrants and their children. The problem is now considerably worse.
Guardian columnists and the BBC refuse to accept that immigration has had any negative impact on housing but if you take immigration figures and add to those the children born to immigrants you will find that fully 82% of the population increase since 2001 has been due to immigration.
So, if 82% of the increase in population has been related to immigration how can anyone possibly suggest that immigration has nothing to do with it?
If there is a housing crisis, and you add several million people to the population do you think that it:
A: Helps the situation?
B: Worsens the situation?
C: Has no impact on the situation?
(If you think options A or C are true then I have some magic beans I’d like to sell you.)
Immigration has had an enormous impact on Britain, much of it positive – but to pretend it has come at no cost – or that the rise in population due to immigration has had no negative impact on the housing shortage – is ludicrous.
It is impossible to find an effective solution when ideology blinds you to an obvious cause of a problem.
Bizarre!!! Hello – demand!!!? A million incomers a year?. A free moving population which has swelled uncontrolled unaudited by 6 to 8 million since the 90s whilst house building crawled along at 200,000? And the market has not ever truly crashed. What happened during the dips down was that people just stayed put. Estate agents went loco as there was zero stock on books. Check out the number of sale/purchases in those times. The belief that property inflation was baked into our system (help to buy; zero interest rates; nimbyism; the criminal council house sale scam) has NEVER been overturned because it IS an out and out heist and scam in which we all are complicit.
Does the UK like the US have a looming commercial real estate vacancy problem ? Are they watching the WeWork collapse ?
Does the UK like the US have a looming commercial real estate vacancy problem ? Are they watching the WeWork collapse ?
Bizarre!!! Hello – demand!!!? A million incomers a year?. A free moving population which has swelled uncontrolled unaudited by 6 to 8 million since the 90s whilst house building crawled along at 200,000? And the market has not ever truly crashed. What happened during the dips down was that people just stayed put. Estate agents went loco as there was zero stock on books. Check out the number of sale/purchases in those times. The belief that property inflation was baked into our system (help to buy; zero interest rates; nimbyism; the criminal council house sale scam) has NEVER been overturned because it IS an out and out heist and scam in which we all are complicit.
Let’s face it: the central focus of both parties’ economic policy for the past thirty years has been to buy middle class votes with artificially inflated house prices.
We should never forget that it was a Labour Chancellor who changed the way that the cost of living is calculated in order to conceal from his own voters just how royally he had stitched them up.
Let’s face it: the central focus of both parties’ economic policy for the past thirty years has been to buy middle class votes with artificially inflated house prices.
We should never forget that it was a Labour Chancellor who changed the way that the cost of living is calculated in order to conceal from his own voters just how royally he had stitched them up.
No discussion of the real problem – a rising population caused by immigration. What is the point?
Most people would rather have a job than own house. One is the means the other the result. I don’t feel sorry for today’s young people walking in to “lazy” jobs, no intention to save and expecting everything to be handed to them.
Exactly!
Immigration is the problem.
Time for a new COVID, and one that actually WORKS, this time please.
Bloody Chinese! Even the deadly viruses they manufacture don’t work properly.
Precisely!
Precisely!
Bloody Chinese! Even the deadly viruses they manufacture don’t work properly.
Okay, which generation created the “lazy jobs”? Also, to say younger people are lazy is untrue as they often spend more time at work than all other age groups. Also, it is impossible to save substantially when Millennials and Zoomers have the lowest spending power out of any generation in modern British history. The average house deposit for 10% would need to be around £30k. Even if you have a partner to split the task with, you would need to save at least £250 a month to reach that goal within 5 years. Out of reach for most young people on a low-mid £20k salary, especially if renting privately.
Have you got any facts to back this up? Spend longer at work than any other generation? Is that also true of other generations at the same point in their development – the article points to the opposite being the case. As a Londoner who has moved out I feel for those trying to save for a deposit there. On the other hand there are 5% deposit mortgages for young people, house prices outside London are significantly cheaper (nearer to 200k than 300k as the article states), there are lifetime ISAs to help the young save for a deposit. Why should a single person have a right to own a house unless they are earning a lot of money?
Why shouldn’t every person have the same right to own a house?
Prices currently are quite ridiculous. The small house I purchased in 2016 for $45,000 is now valued at a selling price of $225,000 and that price is down from last year at$253,000. I would love to have sold and made a $200,000 profit. But where would I then live as the average home cost is $375,000 to purchase another or $2,100 /mo for a rental that used to cost $850. This is why some people stay put.
Not that you need advice from me but sit tight and make sure that your next house is a cash purchase. Don’t want any more money going to the banks. Outside London the average UK house price is closer to your home. Over 2k a month rental is way above average.
Not that you need advice from me but sit tight and make sure that your next house is a cash purchase. Don’t want any more money going to the banks. Outside London the average UK house price is closer to your home. Over 2k a month rental is way above average.
Why shouldn’t every person have the same right to own a house?
Prices currently are quite ridiculous. The small house I purchased in 2016 for $45,000 is now valued at a selling price of $225,000 and that price is down from last year at$253,000. I would love to have sold and made a $200,000 profit. But where would I then live as the average home cost is $375,000 to purchase another or $2,100 /mo for a rental that used to cost $850. This is why some people stay put.
Have you got any facts to back this up? Spend longer at work than any other generation? Is that also true of other generations at the same point in their development – the article points to the opposite being the case. As a Londoner who has moved out I feel for those trying to save for a deposit there. On the other hand there are 5% deposit mortgages for young people, house prices outside London are significantly cheaper (nearer to 200k than 300k as the article states), there are lifetime ISAs to help the young save for a deposit. Why should a single person have a right to own a house unless they are earning a lot of money?
Exactly!
Immigration is the problem.
Time for a new COVID, and one that actually WORKS, this time please.
Okay, which generation created the “lazy jobs”? Also, to say younger people are lazy is untrue as they often spend more time at work than all other age groups. Also, it is impossible to save substantially when Millennials and Zoomers have the lowest spending power out of any generation in modern British history. The average house deposit for 10% would need to be around £30k. Even if you have a partner to split the task with, you would need to save at least £250 a month to reach that goal within 5 years. Out of reach for most young people on a low-mid £20k salary, especially if renting privately.
No discussion of the real problem – a rising population caused by immigration. What is the point?
Most people would rather have a job than own house. One is the means the other the result. I don’t feel sorry for today’s young people walking in to “lazy” jobs, no intention to save and expecting everything to be handed to them.
Another reason ’young people’ aren’t buying homes is because they are from generations that take a very long time to grow up.
Quite hard to grow up when you’re priced out if doing so. If they leave home and rent they have no chance of saving a deposit, if they stay home and try and save the multiple years salary required then you label them childish. They can’t really win can they
Not to mention that the gap between salaries and house prices has increased massively. In the mid 1980’s the average salary was around £8800 and house prices around £30,000. Now the former is around £30,000 and the latter is over £300,000. Bearing in mind most younger people will be on below average salaries for the first part of their careers, how the hell do people like the above commenter expect them to save? I would love to see them try and do it in todays climate. They’d be the first to be complaining about how unfair it is.
Not to mention that the gap between salaries and house prices has increased massively. In the mid 1980’s the average salary was around £8800 and house prices around £30,000. Now the former is around £30,000 and the latter is over £300,000. Bearing in mind most younger people will be on below average salaries for the first part of their careers, how the hell do people like the above commenter expect them to save? I would love to see them try and do it in todays climate. They’d be the first to be complaining about how unfair it is.
Hmmm, pray tell, are you a member of that generation who raised said young people?
Quite hard to grow up when you’re priced out if doing so. If they leave home and rent they have no chance of saving a deposit, if they stay home and try and save the multiple years salary required then you label them childish. They can’t really win can they
Hmmm, pray tell, are you a member of that generation who raised said young people?
Another reason ’young people’ aren’t buying homes is because they are from generations that take a very long time to grow up.
I believe the figures quoted in this article about vacant properties have been thoroughly debunked.
Firstly, the figure given appears to conflate vacant properties, empty and unfurnished for a period of more than one month, with unoccupied, furnished but unoccupied for any period in a year of 1-3 months depending on the criteria applied by local government.
About 450,000 of these properties fall into the unoccupied category and of these, the two largest sub categories are costal properties used for holidays, which include static caravans in the data and student accommodation.
The remaining 250,000 vacant properties may sound a lot but is only 1% of the total supply. Compared to the OECD average of around 10% this is extremely low. Even Netherlands, with its extremely high population density, is on 4%.
It’s should also be remembered that vacant properties are often vacant for a reason. Either old and dilapidated or more typically situated in an area of the country were there aren’t the jobs to support a larger population, they’re not a viable option solve the housing crisis.
The financialisation of property may play a role but the core problem is boring old supply and demand.
Duely noted. Yet again if there is not enough housing there is even less affordable housing. Agreed?
Duely noted. Yet again if there is not enough housing there is even less affordable housing. Agreed?
I believe the figures quoted in this article about vacant properties have been thoroughly debunked.
Firstly, the figure given appears to conflate vacant properties, empty and unfurnished for a period of more than one month, with unoccupied, furnished but unoccupied for any period in a year of 1-3 months depending on the criteria applied by local government.
About 450,000 of these properties fall into the unoccupied category and of these, the two largest sub categories are costal properties used for holidays, which include static caravans in the data and student accommodation.
The remaining 250,000 vacant properties may sound a lot but is only 1% of the total supply. Compared to the OECD average of around 10% this is extremely low. Even Netherlands, with its extremely high population density, is on 4%.
It’s should also be remembered that vacant properties are often vacant for a reason. Either old and dilapidated or more typically situated in an area of the country were there aren’t the jobs to support a larger population, they’re not a viable option solve the housing crisis.
The financialisation of property may play a role but the core problem is boring old supply and demand.
Moronically incompetent.
There may be some cyclicality in housing prices, but the overall trend in all Western countries is a long term sharp real terms increase over the past 4 decades.
Attempting to deny the effects of ever increasing real demand (from a variety of sources – huge net inward migration, family breakdown leading to more households, vastly increased student numbers creating additional housing demand, increased second home ownership, under-utilisation of large family homes by some retirees [I am not saying this is wrong, simply that it is a significant effect on net demand and supply) is not credible.
To claim that supply makes no difference to price is equally asinine.
Even if house prices drop in a recession, they will still remain far too high in real terms (as an average income multiplier).
How a supposedly educated man can post such patently absurd nonsense in a public forum is beyond me.
Moronically incompetent.
There may be some cyclicality in housing prices, but the overall trend in all Western countries is a long term sharp real terms increase over the past 4 decades.
Attempting to deny the effects of ever increasing real demand (from a variety of sources – huge net inward migration, family breakdown leading to more households, vastly increased student numbers creating additional housing demand, increased second home ownership, under-utilisation of large family homes by some retirees [I am not saying this is wrong, simply that it is a significant effect on net demand and supply) is not credible.
To claim that supply makes no difference to price is equally asinine.
Even if house prices drop in a recession, they will still remain far too high in real terms (as an average income multiplier).
How a supposedly educated man can post such patently absurd nonsense in a public forum is beyond me.
Strange that nobody has mentioned the essential point that dwelling units are immobile and that supply/demand imbalances are therefore quite different in different parts of the country. Thus, building new houses in the North, where demand pressures are weak, does nothing to alleviate problems in the South where demand is strong and supply shortages are critical. There are no easy answers to solving the housing problem, but geography is a crucial factor and leaving it out by just looking at national totals is nonsense.
By the way, Matthew Powell’s contribution is a salutary reminder that figures of so-called ‘vacancies’ are extremely deceptive and their significance depends entirely upon how the criteria for being vacant are defined. Unfortunately, the way the original article treats vacancies is quite simply wrong.
Strange that nobody has mentioned the essential point that dwelling units are immobile and that supply/demand imbalances are therefore quite different in different parts of the country. Thus, building new houses in the North, where demand pressures are weak, does nothing to alleviate problems in the South where demand is strong and supply shortages are critical. There are no easy answers to solving the housing problem, but geography is a crucial factor and leaving it out by just looking at national totals is nonsense.
By the way, Matthew Powell’s contribution is a salutary reminder that figures of so-called ‘vacancies’ are extremely deceptive and their significance depends entirely upon how the criteria for being vacant are defined. Unfortunately, the way the original article treats vacancies is quite simply wrong.
The number of vacancies ignores the location and the location is critical. People don’t want to live in a house which is nowhere near their job. I hope that Unherd carries out subsequent analysis that considers this fact.
Except when it’s a 2nd home somewhere nice for the weekend or Holidays. 873k apparently in England and Wales.
And often pricing ‘locals’ out of that market.
It was also ridiculous of our town to build rental homes costing the same as the average monthly area income. Why it was done…to attract persons with a higher median income to the area to change the current median. But why would a higher income person wish to move into a poorer area? But once again this is how others think to compensate for the areas lack. Not by fixing the issue but by using the money of others to fix their issues.
Except when it’s a 2nd home somewhere nice for the weekend or Holidays. 873k apparently in England and Wales.
And often pricing ‘locals’ out of that market.
It was also ridiculous of our town to build rental homes costing the same as the average monthly area income. Why it was done…to attract persons with a higher median income to the area to change the current median. But why would a higher income person wish to move into a poorer area? But once again this is how others think to compensate for the areas lack. Not by fixing the issue but by using the money of others to fix their issues.
The number of vacancies ignores the location and the location is critical. People don’t want to live in a house which is nowhere near their job. I hope that Unherd carries out subsequent analysis that considers this fact.
A very small step would be to stop calling homes ‘property’.
A very small step would be to stop calling homes ‘property’.
And what is the root of the problem and what is to do about it?
My conclusion is that anything involving money will never be fair and will never be right. After all it is all only one big ponzi scheme from the very start. We were given unto us the world free of charge to start. Who decided some of us somehow owned it and could sell to others who somehow didn’t own it.
Here in lies the biggest issue.
No one actually owns what was given to everyone free. And if one could say they owned it so could all.
Big scheme…from the start.
And too add to that if you wish to discuss lazy..
If each of us had the backbone to build our own homes, make our own clothes, grow our own food, generate our own electricity, route our own water etc, etc instead of relying on others to make, harvest, build or manufacture it so that we can purchase it instead of do the labor none of this would even be an issue. We have become a lazy society as a whole. And a greedy one at that. !!
My conclusion is that anything involving money will never be fair and will never be right. After all it is all only one big ponzi scheme from the very start. We were given unto us the world free of charge to start. Who decided some of us somehow owned it and could sell to others who somehow didn’t own it.
Here in lies the biggest issue.
No one actually owns what was given to everyone free. And if one could say they owned it so could all.
Big scheme…from the start.
And too add to that if you wish to discuss lazy..
If each of us had the backbone to build our own homes, make our own clothes, grow our own food, generate our own electricity, route our own water etc, etc instead of relying on others to make, harvest, build or manufacture it so that we can purchase it instead of do the labor none of this would even be an issue. We have become a lazy society as a whole. And a greedy one at that. !!
And what is the root of the problem and what is to do about it?
Overlooked in the article but think surfaces a bit in the comments is the growth in 2nd Homes – 873k in England & Wales (obviously more if you count Scotland/NI, so prob close to 1m).
Now some of this no doubt is because some folks like a nice place in the country for the weekend or for a holiday, but also they like it as an investment. What’s a better investment than ‘safe as houses’. Stick your savings into British venture capitalism…no chance.
So whilst there is a basic supply & demand imbalance, and arguable too that unplanned net migration an additional factor, the Author has a point that ‘financialisation’ of ‘property’ is an issue too.
Overlooked in the article but think surfaces a bit in the comments is the growth in 2nd Homes – 873k in England & Wales (obviously more if you count Scotland/NI, so prob close to 1m).
Now some of this no doubt is because some folks like a nice place in the country for the weekend or for a holiday, but also they like it as an investment. What’s a better investment than ‘safe as houses’. Stick your savings into British venture capitalism…no chance.
So whilst there is a basic supply & demand imbalance, and arguable too that unplanned net migration an additional factor, the Author has a point that ‘financialisation’ of ‘property’ is an issue too.
Excellent article. One of the things I teach my econ students is: your home is consumption not investment.
The definition of an investment is something you own primarily for the purpose of making money. If you’re a full-time Uber driver, your car is an investment. If you’re not an Uber driver, your car is consumption. It may make sense to own one, but if you do own it, you’re not doing it to make money.
Many people have difficulty with this, especially when thinking of real estate.
Excellent article. One of the things I teach my econ students is: your home is consumption not investment.
The definition of an investment is something you own primarily for the purpose of making money. If you’re a full-time Uber driver, your car is an investment. If you’re not an Uber driver, your car is consumption. It may make sense to own one, but if you do own it, you’re not doing it to make money.
Many people have difficulty with this, especially when thinking of real estate.
There are many things that are pretty messed up about housing policy in this country. Let me give you one, which impinges on the question in the article.
.
Since 2004, British housing policy has been premised on the idea that, if you build enough homes, then the upward pressure on prices will ameliorate. At that time, the magic number was estimated to be 250,000 per annum. We’ve never reached that number since and only approached it sporadically. Completions have generally been at a far lower level. The critical figure is now thought to be c.300,000. Many people therefore assume that the output of homes is undersupplying the market simply because prices are still rising.
.
However, between the last two censuses, housing completions have actually outstripped household formation AND levels of overcrowding have actually fallen slightly. And of course, this takes account of migrtation – without which the demand for additional homes would be negligible.
.
In short, housing policy has been to achieve price stability by somewhat over-supplying the market. But here’s the rub. In this system, who is ultimately responsible for maintaining supply? Developers. Now ask yourself this. Who would be harmed if house prices were to stagnate or fall? The self-same developers.
.
Now do you see the problem? Our housing policy has been premised on trusting that developers will build enough homes to cut their own throats. Amazingly, they have chosen not to do so (all whilst railing for years that they would do so, if only the planning system were relaxed).
.
You don’t have to believe that anyone is acting in bad faith here, in order to realise that this system will continue to fail.
.
A better approach – if affordability and rates of home ownership is what you actually care about – would be to target prices directly. Deliberately suppressing values would force a change in developers’ business models and it would transform the land market (because the underlying value of land would fall as build costs rose and house prices remained flat).
.
Since the land market would then go into deflation, more land would then come forward (better to get today’s price now than the even worse one next year). With landowners now competing to bring land forward, you can build more Affordable Homes as well as homes that are simply, more affordable. Moreover, as you increase the range of affordable options available, you actually increase demand – because the price is no longer disappearing out of reach. You’d need a whole suite of policies to do this, of course – new housing products, a government focus on constraining development costs etc, but it’s totally doable and non-mysterious.
Why would a bank or anyone lend on a depreciating asset ?
No one said anything about decreasing house prices – only suppressing growth. And the point about new forms of affordable housing is that you can actually link prices to incomes, which should render the hinges both affordable and give rise for appreciation too
No one said anything about decreasing house prices – only suppressing growth. And the point about new forms of affordable housing is that you can actually link prices to incomes, which should render the hinges both affordable and give rise for appreciation too
Why would a bank or anyone lend on a depreciating asset ?
There are many things that are pretty messed up about housing policy in this country. Let me give you one, which impinges on the question in the article.
.
Since 2004, British housing policy has been premised on the idea that, if you build enough homes, then the upward pressure on prices will ameliorate. At that time, the magic number was estimated to be 250,000 per annum. We’ve never reached that number since and only approached it sporadically. Completions have generally been at a far lower level. The critical figure is now thought to be c.300,000. Many people therefore assume that the output of homes is undersupplying the market simply because prices are still rising.
.
However, between the last two censuses, housing completions have actually outstripped household formation AND levels of overcrowding have actually fallen slightly. And of course, this takes account of migrtation – without which the demand for additional homes would be negligible.
.
In short, housing policy has been to achieve price stability by somewhat over-supplying the market. But here’s the rub. In this system, who is ultimately responsible for maintaining supply? Developers. Now ask yourself this. Who would be harmed if house prices were to stagnate or fall? The self-same developers.
.
Now do you see the problem? Our housing policy has been premised on trusting that developers will build enough homes to cut their own throats. Amazingly, they have chosen not to do so (all whilst railing for years that they would do so, if only the planning system were relaxed).
.
You don’t have to believe that anyone is acting in bad faith here, in order to realise that this system will continue to fail.
.
A better approach – if affordability and rates of home ownership is what you actually care about – would be to target prices directly. Deliberately suppressing values would force a change in developers’ business models and it would transform the land market (because the underlying value of land would fall as build costs rose and house prices remained flat).
.
Since the land market would then go into deflation, more land would then come forward (better to get today’s price now than the even worse one next year). With landowners now competing to bring land forward, you can build more Affordable Homes as well as homes that are simply, more affordable. Moreover, as you increase the range of affordable options available, you actually increase demand – because the price is no longer disappearing out of reach. You’d need a whole suite of policies to do this, of course – new housing products, a government focus on constraining development costs etc, but it’s totally doable and non-mysterious.
In Vancouver, Canada, we are told ad nauseum that housing will be more affordable when there is more ‘supply’. Still waiting. Prices fluctuate a bit but basically go up and are 5-6x what they were 20 yrs ago. A ‘studio’ (bed-sit) apartment on the 50th floor beside a busy road costs nearly half a million USD$. Many houses have empty bedrooms. We are surrounded by construction of 40-70 storey towers in the name of reducing emissions, yet vast new luxury car lots – usually 1 storey high – are down the street.
In Vancouver, Canada, we are told ad nauseum that housing will be more affordable when there is more ‘supply’. Still waiting. Prices fluctuate a bit but basically go up and are 5-6x what they were 20 yrs ago. A ‘studio’ (bed-sit) apartment on the 50th floor beside a busy road costs nearly half a million USD$. Many houses have empty bedrooms. We are surrounded by construction of 40-70 storey towers in the name of reducing emissions, yet vast new luxury car lots – usually 1 storey high – are down the street.
I don’t know who you are but we all consume housing – one way or another.
If you are going to have a national policy to support one form of consumption – ownership – you will always have housing bubbles. And housing bubbles are always catastrophic.
Currently housing is consuming UK (more and more of spending is going toward housing).
Real estate is not a free market by any standard.
Supply availability is highly controlled by the agents.
Thank you. Someone finally said what I think (and visually observe here in Canada). There is no “shortage of supply.”
Are you telling me that if someone built 10,000,000 new housing units, prices would NOT drop?
I agree. It the same in the USA. They claim housing shortage yet there are at least 1-3 homes for sale every 3 blocks. The problem isn’t the availability of homes, it’s the availability of affordable homes. They built a whole new subdivision of rental homes near us over 250 homes. The average rental rate..
$2,500.00 !
And the rule of thumb of average income for a person to rent them should be 3 times the cost of rent or $7,500.00 a month income.
Yet the average income in this area is between $2,000- $3,500 per month. So that even a 2 income family barely qualifies. The only affordable solution for this has been that 2 families or 2-3 working adults agree to share the rental.
Purchasing a home is a whole different story since the purchaser needs to qualify with the bank and when the average home price is now $375,000. In the area with the same High Average area income of 3,500 per month. Leaves a big gap in affodability for most.
Very true. If the problem is supply- how come prices are falling ?
Because it isn’t about supply
Because it isn’t about supply
Very true. If the problem is supply- how come prices are falling ?