The Case-Shiller composite 10-city index is down 19 percent from its peak back in the summer of 2006. The US housing crash has wiped out all the price gains accrued after June 2004. Imagine that, 4 years of zero house price gains.Could it happen in the UK? Just watch and learn.
9 comments:
How does the US index compare with US approvals, or don't we have that data?
I expect if one reckons US inflation into the equation it's more like no real gain in six years.
I think stable house prices (i.e. only ever advancing at the rate of inflation) or even usually gently declining would be a very good thing for the UK.
The cost of a house ought to be its build cost, with some small consideration for the developer and the cost of the land. As a house gets older, if it is not maintained in pristine condition I think it is fine if its value correspondingly deteriorates.
In the UK not enough land is released for housing; that, along with a chronic tendency for the currency to inflate through mismanagement of the economy, leads to the assumption that for many the only sure 'investment' is a house. But it's enough if a house is somewhere to live, not a source of capital accumulation.
I don't know why the UK government has historically failed to manage the currency properly, but the failure to zone properly and release sufficient land for housing relates to many private and perhaps less than honourable motives.
The upper and middle classes, having monopolised the best places to live, influence planning according to their tastes (e.g. 'preserve the countryside at all costs'), even though many still live very nicely on ribbon developments and the speculative estate building of the last two centuries, which invaded the coutryside to their advantage before strict planning was introduced.
I suppose behind that went the land-grabbing of Saxon, Viking and Norman overlords, and then the elite accumulation of land especially under the Tudors, and then again in the eighteenth century.
A very few people and institutions own a great deal of land in the UK; this distorts the housing market as building land is released very slowly at exorbitant prices, to the advantage of very old capital such as that bestowed by royalty on the aristocracy and by both on Oxbridge colleges (a vast amount of farmland and property in villages, towns and cities, worth many billions, rarely quantified or made known to the general public).
For these reasons, the UK has its endless dance around the housing market. Other nations say: We wouldn't want to live in such small houses as the Brits do! In other words: Thank goodness we were never quite so exploited by the pre-industrial elite! Those Brits think a tiny peasant's cottage is a dream home!
No. let's not have property prices that rise constantly. It's to the general harm.
B. in C.
B. in C. That's a pile o' shite above in a your analysis- ever heard of greenbelt? In addition to that, there is no British town I know where you don't swiftly come to privately farmed land soon upon leaving a city or town. This land is not usually in the hands of aristocrats, but middle income farmers. Some gentry and above all the government own land further away from the towns- but no one wants to live on top of dartmoor and if they did (which actually they might) there'd be a greenie outcry.
The causes of high UK house prices are a bit more complex, but I would consider a significant factor the rip-off Britain of developers, builders, and plumbers a significant contributory factor.
House prices in the UK doubled in five years, so why shouldn't they halve?
They WILL halve I am sure.
However, Gordon Brown will try every trick possible to perpetuate
house price inflation to bouy the economy... and let's face it there is not much else that creates wealth in the UK now is there.
The UK will not trully be economically stable until we become more self sufficient, regenerate our industries and earn our money instead of borrowing it.
Won't happen soon methinks !
Ed: thanks for your compliments.
I have seen an archive list of an Oxbridge College - at 'Deeds' it started 'land in the villages of...' starting with A, and then just kep going for many entries and many villages, and then eventually moved on to B... estmating at only £1000 word of land for each village mentioned (ridiculously low), I lost count at £2 billion... that was some years ago.
All that farmland is rented out to tenant farmers - many of your middle income farmers. It's best not to assume all those middle income farmers you mention own the land they farm.
One can have a look from the other end at the land used by sheep-farmers on Romney marsh in Kent - one parish church displays a map, according to which most of the land is in the hands of Oxbridge Colleges.
But my point is - wherever the large landholdings are, they distort the possible market in building land. And aristocratic fortunes may no longer be in land, but in commercial and other property - but it all still distorts the market, and leaves housebuyers scambling around the edge. Look at France or Germany - they don't have these problems.
John Snow once did a summary in a programme called "Who Owns Britain" - the statistics were shocking.
Yes, I know about greenbelt - and that's part of my point: beyond nice middle class suburbs on the edge of towns and cities, there is farmland, which the middle classes enjoy and make sure is never built on. There may be good reasons for that: but I notice they are not making any efforts to accommodate the enormous demand new household formation pouts on house prices. Land is released slowly through the planning porcess to developers, who can make a killing as well as the lucky few who can sell farmland for development.
But at the back of this there has not historically been sufficient political will to open enough land for building - it's left to the market and the planning process. and look where that has got us.
As for Dartmoor - yes, aristocrats left the bad land to yeoman farmers...
And much of the Duke of Westminster's estates were not kept as greenbelt, I believe...
Best,
B. in C.
buy to let? how stupid is that? just how many MP's have second, third homes etc.(tony blair?) do owners pay full council tax on a second home?
how many local councilors have second and third etc. homes?
how much of the last boom was buy to let?
has anybody been to norfolk? Suffolk coasts? it's a london second homers paradise. burnham market? locals priced out or what?
how come govt. never taxed this sucker (maybe they own a piece of it?)(individually?)
"John Snow once did a summary"-
whoops B. in C. I suspect that's half the problem with your analysis right there. Speaking as a person with farming relatives in all corners of England, mostly in freehold but sometimes tenant, and having lived in rural Lincolnshire quite a chunk of my life, I simply know that land ownership and use of land is not so antiquated as you imagine.
For a start, land has generally not produced much of a return by the standards needed for an aristocratic lifestyle. It's also very hard work and not easy to coordinate. Most estates have collapsed over the years - now that's a documentary C4 ought to make- especially following the two wars. Many failed to find inheritors.
But that's a sideshow compared with the fact that anybody of private estate who had saleable land near urban areas has been selling it to the max for the last 20 years, if not the last 40. The value ratio between building land and agricultural land (easily distinguishable) has made that inevitable. There couldn't be the distortion you claim in such a climate, and there isn't. I am sorely afraid that you have fallen victim to the left's great Snowjob concerning the inheritors of land.
Ed - thanks, I am not wed to the thesis!
But I am convinced there has to be something seriously wrong with how our property market and wider economy functions.
The simplest explanation re. the property market would be that there are too many people on a small island - but then there are other countries (e.g. Germany) with an even higher population density - or maybe about the same - but from memory it's higher - and property prices there were for years stable, though relatively high, in a low interest rate environment more benign than the UK's recent experience.
But since the Barber-Heath dash for growth property here has been up and down like a yo-yo, and it looks to me as if the swings are getting worse, not better.
Another area I think needs exlaining about the UK is the high cost of renting business premises. Most of the small businesses I know have been working like crazy just to make the rent on relatively small premises for years.
So - over to you - what does lead to a dire shortage of residential property in the UK, and business rents so high that the landlords make money so easily compared with very hard workers?
Is it just the taxation environment? Or might there not be a problem of lazy rent-capitalism that is so old and entrenched that nobody cares any more, but would only like to emulate it?
Let me rephrase this: "very old capital such as that bestowed by royalty on the aristocracy and by both on Oxbridge colleges (a vast amount of farmland and property in villages, towns and cities" - emphasise the "such as" and cut out the 'very old', say.
What I see in the UK is that small businesses which are premises-bases (rather than white-van-based), unless they are rather well capitalised at the beginning, too much of their work benefits the landlords, not themselves. My anecdotal observation is the same about tenant farmers.
Is there nothing wrong with the fundamental distribution of landed property in the UK?
If you talk with Oxbridge fellows about the apparent size of the College landed endowments, so huge it can fund luxurious dining in some on a near-feudal scale of indulgence, they clam up mighty quickly. It's such a pity - an absolutely massive educational endowment being used to such narrow effect.
And then you watch what happens in the dining halls, as seventeen-year-olds serve some rather brash, obnoxious undergraduates who treat them like - what was that word you like to use? - you might think there was something fundamentally wrong with the UK.
What do you think it is?
B. in C.
P.S. I didn't know everything John Snow said was self-evidently pointless...
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