I keep saying that share prices are over-inflated, because they are.
So too are house prices, as I have also said for a long time.
I got an email this morning announcing the publication of the Halifax House Price Index for January 2025.
As it notes:
The average house price has exceeded the £300,000 threshold for the first time, now sitting at £300,077.
Median household earnings before tax are around £40,000 a year now.
The average house now costs 7.5 times median earnings. Odds are quite simply stacked against people in this country, all because of rent extraction and artificially inflated asset prices, deliberately designed to keep the wealthiest happy at the expense of everyone else.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
As George Monbiot pointed out high rents and house prices are effectively a private tax on all of us for the temerity to simply be alive
Agreed
Thatcher’s dream destroyed by greed and the shortsightedness of thinking that unemployment is acceptable and that people are expendable. A pathetic epitaph to Neo-liberalism.
“Thatcher’s dream” – turned into nightmare for most UK serfs. Which was the point all along.
Yes – undoubtedly true – but that does not stop the right to buy applications coming in, in social housing Mike. And what else does your ‘owning you own home’ penury get you? Credit Mike, lots of loans – cars, holidays, shopping and you don’t really have to invest in the asset when you’ve got it, just sweat it…………….
Reflecting more on this post though and the crossover with the Epstein affair……………….
What sort of society is it that reduces young girls (it could be young boys too) to essentially rely on the discretion of the rich to fund their ambitions through promises to pay their tuition fees and stuff like that for ‘favours’? It’s akin to ancient society when you had to send your daughter into service to pay down debts that Michael Hudson has written so much about. A society that loads debt onto young lives so early? Where the present PM promised to abolish fees and then changed his mind .
A society where desperation and opportunity is preyed upon. How unpleasant this all is. We could and should do a lot better than this.
Shares and houses are a little different. For most people, shares are of no use apart from their possible increase in value. However, everyone needs a house.
And they can’t get one
“and artificially inflated asset prices”
Prices are established by buyers and sellers, more buyers they go up and vice versa. Why is that artificial? They can be volatile but that is not the same thing.
The injection of funds to benefit the wealthy has created artificial prices
“The injection of funds to benefit the wealthy has created artificial prices”
Which funds?
Start with QE for banks
House prices are artificially inflated by the amount of money banks are prepared to lend. Back in the 1980s, the rule of thumb was, when building societies still existed, 2-2.5 X salary, plus a 5-10% deposit. That clearly restricts how much you can borrow and therefore offer to buy a property. Today, that earnings multiple is far higher, often with a much lower deposit requirement and therefore, would be buyers can make a higher offer. That is how property prices are artificially created.
I think you need to look a bit further old chap.
Whilst I don’t disagree with you sentence, it needs context & the context was ultra low interest rates that turbo-charged “buy to let”. Once you have assets it is not that difficult to accumulate more. As has been noted on this blog, low interest rates in the period 2010 to 2020 caused “asset price inflation” and given the quasi-static UK housing stock, and given static wages in that period, it is not surprising that house prices rose, dramatically, driven to some extent by buy-to-let (as well as the scarcity factor). Willing buyer-willing seller – yup – but you need to also factor in things such as scarcity – which has an impact on price development/formation.
There have been numerous schemes designed to ‘help people onto the property ladder’, such as reduced stamp duty, grants to increase savings for a house deposit, relaxation of mortgage regulation etc. All of them had the effect of inflating house prices. Yes, a house will only sell for a price the buyer is prepared to pay, but every family needs a house and rents now cost even more than mortgage repayments in many cases. the current scam to increase house prices is for a mortgage offer to take into account how much rent a prospective purchaser has been paying, as that proves they can afford that much in morthahe repayments.
It’s artificial because it is a human construction presented almost universally as if it were simply the natural order of things. But it isn’t. A simple glance at history reveals that house prices only started rising in the UK in the 1970s after Schedule A taxation of imputed rent value on owner-occupiership, which had been around since the 18th century, was abolished by the Tories as a classic pre-election giveaway in 1963. Until then, it was in owners’ best interest that their house did NOT rise in value.
Added to that we have the extraordinarly crass decision early in Thatcher’s first ministry to allow banks to lend on housing and the fuse was lit for the current disaster. It may well generate some real social anger one day, which would at least be something, but bank lending should always have been reserved for entrepreneurial purposes given the ability of banks, not shared by building societies, to create money essentially ex nihilo; how ironic that the decision which led to UK bank loan books going from 0% on domestic property to currently over 80% should have been taken by a Tory who never stopped talking about enterprise.
Reforming all this is of course now impossible, unless a party wishes to commit electoral suicide. That is why I say that nowadays Britain is simply a housing market with an increasingly decaying society attached. I don’t think the description volatile is really saying anything.
“Prices are established by buyers and sellers, more buyers they go up and vice versa. Why is that artificial? ”
❌House builders deliberately slow down the building of new houses in order to ensure a shortage and artificially keep prices high.
❌Institutional investors buy houses in order to rent out properties, causing a shortage and keeping prices artificially high.
❌The government refuses to build houses to meet demand, keeping prices artificially high.
Not to mention demand-side subsidies, financial deregulation and cheap credit. This neoliberalism, whose propaganda makes you think there is nothing artificial about house prices.
Halifax also noted that wage inflation has been higher than house price inflation, so that affordability has been improving, albeit marginally, for 4 years now.
A significant house price correction would be harmful to those with limited equity, so while it may help more than it hurts, the cost of those left unable to move homes, etc, could be significant.
An extended period where prices increase less than wages means building property assets mainly through repaying a mortgage principal rather than price inflation, which is reasonable, while slowly improving affordability for those not already on the ladder.
Combined with gradually lowering interest rates, that also eases cost of living pressures.
The downside is that it then takes years to build up enough change to make much difference, and may be so gradual people don’t even notice the improvement.
Interest rates
Credit controls
An option to sell to the state for the value of the mortgage to end negative equity
Rent controls
We need all of those
The Bow Group – Right Wing Tories suggested that the Government should set a target price for average house prices of 4x earnings.
It would certainly put speculators on notice
Hut Taxes on the natives a very old, vile colonial model.
No taxation without full and effective representation.