Monday 9 September 2013

How to price the British housing market?
The Economist magazine published an interactive tool at the end of last month, to show what's happened to house prices since 1975. They say that (thanks to Osborne's vote-buying house purchase schemes) "the British market is picking up even though its fundamentals—unlike America’s—suggest continued overvaluation."

This is just fun with statistics. Prices "in real terms" may change when food and fuel get more expensive and "average incomes" ignores widening regional and income-group disparities.

I have also suggested before now that we don't have a housing shortage, we have a housing misallocation. Rents would be lower if we had some properly enforced policy on economic immigration. And there is the vexed question of all those spare bedrooms - "taxing" them hits families that don't have it easy, yet very many old people are clinging on to property that's dauntingly difficult and expensive for them to look after (my wife's grandmother hadn't been able to go upstairs for decades).

But thanks to the fragmented family, people are less likely to take in their elderly relations. I know a doctor who, when a chap wanted to complain about how his old 'un was being looked after, agreed enthusiastically and offered to have the ambulance follow the chap home so she could be safely installed into his loving care; gosh, how fast the complaint went away!

Inflation is a matter of choosing A and B and comparing them. Unless Osborne plans to imitate Rudolf Havenstein then his (and the supposedly independent BoE's) pumping has to stop, probably after the 2015 General Election. My guess is that except for "hot spots", house prices will decline in cash terms, especially as unemployment and underemployment continue to undermine the workforce.

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