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The problem of inflated prices lies in property speculation. That’s what we need to clamp down on There is no two ways about it, I do like Ann Pettifor, although I like Positive money too who she has differences with about fractional reserve banking. Excerpts - Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem. What has bitcoin mania got in common with
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The problem of inflated prices lies in property speculation. That’s what we need to clamp down on There is no two ways about it, I do like Ann Pettifor, although I like Positive money too who she has differences with about fractional reserve banking. Excerpts - Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem. What has bitcoin mania got in common with
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
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The problem of inflated prices lies in property speculation. That’s what we need to clamp down on
Excerpts -
Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem.
What has bitcoin mania got in common with house prices, especially in the capital? For starters, both are speculative bubbles. Vast sums of money have been poured into finite supplies of bitcoins and London property. Both have consequently exploded in value, albeit over different time periods. And so both have become financialised assets that deliver capital gains far in excess of people’s ability to earn income from work, or from investment in the real economy. And as with bitcoin, so with London property: speculators are convinced that prices will continue to rise for ever.
It’s speculation in the property market that is fuelling stratospheric house price rises, not shortage of supply. When the “fuel” of private capital, mortgage credit and cash from the bank of mum and dad is supplemented by government subsidies and tax breaks, house prices rise. Moreover, wealthy global and non-resident buyers have funnelled more than £100bn into London property over recent years, making the problem even worse.
So, rather counterintuitively, building more houses is not the right prescription. House prices won’t fall until the tide of cash flowing into the market abates, for example by tightening mortgage credit, or shrinking the pool of buy-to-let investors. That may already be starting to happen as real incomes continue to fall, the Bank of England toughens up buy-to-let mortgages, and stamp duty rises are phased in for second properties.
The best way to do this is through the tax system. First for consideration should be a property speculation tax (PST), as in Germany. This could be used to levy punitive rates on speculators, or those who own second homes and empty properties, encouraging them to invest their cash elsewhere.
Second, the government must manage speculative capital flows in and out of Britain by taxing them through a Tobin tax on global financial transactions. Corrupt politicians in the poorest countries and oligarchs in weak economies shift often-fraudulent cash into stable jurisdictions such as the UK. These mobile flows of capital inflate the price of Britain’s fixed supply of land.