The over 50's vote predominantly Tory believing that high house prices had made them rich. Yes, on paper, but can they ever realize the money because where are they to live when they sell their home. And every time they moved to the housing ladder they became clobbered with a huge mortgage again making them poor causing them to go without and work excessive hours. What a life?
Well, I absolutely hated the high house price game because it caused new to spend too much time at work when I loved my leisure time.
There are reasons for optimism when it comes to affordable housing in the UK, despite the state of crisis that currently engulfs the sector. For the first time in decades, both major political parties seem to have realised that the housing market is fundamentally broken and that it is a domestic political priority.
The Conservative Party has finally accepted that not everyone can own a home, and that the provision of decent-quality rental and public housing is a necessity. The decision to finally lift the cap on local authorities’ ability to borrow to invest in new development is perhaps the biggest sign of this change, of course, although much more investment from central government is likely to be needed.
Equally promising are signs that the land problem is being better understood, with Labour investigating a serious property wealth tax, and Sir Oliver Letwin’s review of land value capture pulling no punches. Moreover, as the level of homeownership falls, it is likely there will soon be an electoral majority in favour of reducing house prices.
Social Housing
3 comments:
“The over 50's vote predominantly Tory believing that high house prices had made them rich. Yes, on paper, but can they ever realize the money because where are they to live when they sell their home? And every time they moved up on the housing ladder they became clobbered with a huge mortgage again making them poor causing them to go without and work excessive hours.”
In the USA, property taxes are based on the market value of a house. The higher your market value, the more property taxes you pay. Therefore, since you can’t make a profit selling your house, its rising market value causes you to lose money by paying higher and higher property taxes.
It is banks that make housing unaffordable. Since banks create loan money out of thin air, they want to lend as much money on houses as banks can get away with, since higher loan amounts mean higher profits from interest payments. Higher loan amounts mean higher market prices.
“The decision to finally lift the cap on local authorities’ ability to borrow to invest in new development is perhaps the biggest sign of this change, of course, although much more investment from central government is likely to be needed.”
See? The banks and the politicians want to “help you” by screwing you. More borrowing means more loans, which means higher market values, which means higher interest payments to the banks, which means the banks get richer, while average people get no farther ahead, and actually fall behind because of rising property taxes.
Sweet!
Hey, Konrad, I'm going to have to go back and tweet Josh that. Well spotted!
Konrad, It's debatable as to whether those wicked banks have any effect on house affordability because house prices move very closely in sync with interest rates. I.e. when interest rates halve, house prices approximately double. See 2nd chart here:
https://ralphanomics.blogspot.com/2018/12/random-charts-66.html
That's for the US. For the UK its been about the same story: interest rates paid by mortgagors are now about a third of what they were in the 1980s, and house prices have trebbled in real terms approximately.
As a supporter of full reserve banking (under which commercial banks cannot create money out of thin air) I agree that interest rates would be a bit higher under full reserve. But there again, that change in interest rates won’t have much effect on house affordability for reasons given above.
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