The FT reports this morning that:
Since 2012, developers [in London] have begun building 44 per cent more homes than they have managed to sell. Last year, work was started on 1,900 luxury apartments, but only just over half have sold.
As someone once wrote:
I'm forever blowing bubbles,
Pretty bubbles in the air,
They fly so high,Nearly reach the sky,
Then like my dreams,
They fade and die.
Fortune's always hiding,
I've looked everywhere,
I'm forever blowing bubbles,
Pretty bubbles in the air.
That's the tale of the modern London apartment block for you.
And that's the tale of market failure.
Meanwhile, the rest of the country faces a housing shortage.
You could not make it up.
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If the market drops the prices to make the sales, or if they now get more permissions to build lower cost housing where people want to live, then that would be an example of markets working.
I wonder what obstacles are placed in the way of house builders getting more permissions in a reasonable timescale.
The obstacle is the one the FT applauds this morning, which is their choice to not make application because this would create an increase in supply and so a fall in price
They were hoping, & they got, the Conservatives grotesque “help to buy” scheme which uses taxpayer’s money to shore up house prices.
Who, in God’s name, thought that was a good idea?
“then that would be an example of markets working.” So what outcome would you call market failure? Whatever happens it is always the work of the market? Bit of a circular argument don’t you think.
What on earth are you on about? You’ve referenced a quote and question that don’t relate to anything written above.
We all know there are micro markets in property. High end London is inflated through QE and foreign capital flows. Both are slowing/reversing so it is inevitable prices will fall. Developers will cut margins/ lose money, it doesnt matter. Very few transactions are going through at all in London and an albeit crude generalisation might suggest clearing prices may be 20-25% lower than published offers perhaps more at the high end. But that area of the market will correct it always does.
Of course stamp duty is a killer, particularly in London. You will know whether the tax take has gone up or down post the hike in rates?
No
HMRC publish data though
The aim was to suppress prices
Yield was not the objective
There are quarterly SDLT statistics and monthly property transaction statistics:
* https://www.gov.uk/government/statistics/quarterly-stamp-duty-statistics
* https://www.gov.uk/government/statistics/monthly-property-transactions-completed-in-the-uk-with-value-40000-or-above
In broad terms, there was a big drop in SDLT receipts in 2007-8, but since then there has been a general upwards trend in both number of transactions and SDLT yield, even with the 3% surcharge for second properties and the 15% rate for “non-natural persons”. The latest statistics show a typical seasonal weakening in Q4, and Q1 is usually the lowest of the year.
A correction should show earlier in the monthly transactions. From the monthly numbers, you could make a case for numbers of residential property transactions being flattish for the last few years, and increases being attributable to non-residential. Brexit might affect that!
Many thanks
Appreciated
The PM pretty much admitted that the market is failing when she said “The bonuses paid to the heads of some of our biggest developers are based not on the number of homes they build but on their profits or share price,” and “In a market where lower supply equals higher prices that creates a perverse incentive”
Unfortunately for her she just described exactly how ‘Free markets’ work and only compounds the fact that, like in higher education, they are failing and the state needs to step in with a good healthy dose of regulation. Though it seems the Conservatives are too dogmatic to actually see that.
To me the problem is that the asset function of housing has become far more important that its (social) use value. This has resulted in a huge misallocation of resources that is frankly unforgivable.
And until May’s Government reinstitutes the grant regime it ended for remediating brownfield land I will take her ‘commitment’ to new housing with a bucket full of salt.
Brownfield sites that blight our cities – where there is already infrastructure for utilities and road access for example which brings down the cost of building just sits there doing nothing because no one can be arsed to clean it up properly and make it fit for use. A job for an enabling State if there ever was one.
There is also an over provision of office space in most cities in the centre.
So attention turns to NIMBYism and being too protective of our countryside. I detect another Tory Trojan horse policy here.
For gods sake the only people who can afford to live in rural areas that are dug up for homes are those who can afford to run multiple cars and expensive bus fares!! And also afford the higher end prices of these new homes.
Who does May think she is kidding?
You should look at Harworth plc, busily working on recovering brownfield sites. Applications within the planning system include 1,308 residential plots and 325,000 sq ft of commercial space, and these form part of a wider pipeline of applications over the next three years that will cover more than 4,500 residential plots and 5.9m sq ft of commercial space. Lots of work going on there
So?
So? One of your commentators said
I supplied a name of a company actively doing just what PSR wanted. I am sure there are many others
Graeme
All I can say that in the City where I work the brownfield situation has caused major headaches especially since the BF remediation grant from Government has been cut and then wound down. Phase 2 of a major regeneration scheme for example where I work has been held up since 2012 over this issue. The schemes you talk of could have been in the pipeline for years. I’d like to see how the cost of remediation affects the unit price of the new homes.
I see this wherever I go in the country. Lots of land or derelict buildings that have just been lying there for far too long.
But a question (not to you, but generally) why more retail space? I see loads of empty retail and office space all of the time. Our city centres have too many empty shops in them. And will the new homes be affordable? I mean genuinely affordable?
Despite your optimism, a lot of it does not add up to me.
Perhaps if we are really serious about sorting the housing shortage we should allow a bit more green field land to be built on, we obviously need to increase supply by a lot to bring prices down to an affordable level.
Desp
Read Danny Dorling
The evidence is we do not have to do so
Is the relevant article about oversupply or was I just imagining that?
Hi Richard,
Great talk tonight at the School of Economic Science. Thank you.
But I’m deeply worried by the ex-HMRC lady. If the best our tax collectors have to offer is hope of self-regulation by the tax-dodging industry, I’m not expecting a great deal of progress. Legislation would seem a more reliable course than “ethics”.
Anthony Molloy (Chair of the Labour Land Campaign)
Thanks
What struck me was an illustration of luxury vs standard flats. A few changes in fittings it seems. The rest is I presume size and mark up