Like second marriage, this looks like an example of hope triumphing over experience!
Showing posts with label house prices. Show all posts
Showing posts with label house prices. Show all posts
Tuesday, 9 December 2008
Tuesday, 30 September 2008
A real economic roller-coaster
Ever wondered what it would be like if the housing marked really was a roller-coaster ride?
Well, some clever wag has created a roller-coaster using Roller Coaster Tycoon 3 and using a graph of US house prices since 1890 as the shape of the track.
An amusing graphic to demonstrate the madness not only of the bubble that has just burst but the overall picture over the past 118 years.
Enjoy!
Real Estate Roller Coaster
Well, some clever wag has created a roller-coaster using Roller Coaster Tycoon 3 and using a graph of US house prices since 1890 as the shape of the track.
An amusing graphic to demonstrate the madness not only of the bubble that has just burst but the overall picture over the past 118 years.
Enjoy!
Real Estate Roller Coaster
Friday, 25 May 2007
A house-price crash will save the Government from finding a policy solution
I’m sure Henry George was spinning in his communally-owned grave last night (though having seen this, I wonder if he’s been spinning for some time!).
Newsnight devoted most of their programme last night to housing. (Not that you’d guess by reading the first comment on the Newsnight blog, which drips anti-Semitic bile). Gavin Estler chaired a debate between Housing Minister Yvette Cooper, a Tory shadow less aristocratic than Michael Gove, the owner of a chain of estate agents and somebody from pricedout.org. It was interspersed with a few reports.
In the first instance, just about everybody agreed that more housing was needed. The Government recognised that 220,000 new houses were needed each year, but blamed Tory councils for blocking planning permission. One commentator then noted that it had taken the Government ten years to raise house-building from 100,000 to 110,000, whereas in the 1950s the Tories managed to raise house-building from 200,000 to 300,000 in a couple of years. The lady from pricedout.org agreed that more housing was needed. Everybody agreed that there was a supply problem, but nobody explained how it was to be solved, or why we are tearing down houses in the North of England while building new ones in the South.
There followed a series of truly bizarre proposals, including the usual anti-capitalist assault on second-homers and those buying to let (in an example of economic illiteracy, Ms. pricedout argued that more supply would merely be mopped up by wealthy buy-to-let landlords and so would not benefit first time buyers, which showed a total ignorance of the most basic principle of economics). Poor hippies could no longer afford to buy houses in the bohemian paradise of Totnes, lamented one Newsnight reporter, who seemed to wilfully ignore the fact that those selling their houses to property magnates and .com millionaires were the very hippies and artists who had given the place its character, and were now happily cashing in on the very material windfall that they had enjoyed.
It’s all the fault of the money-lenders, went up a cry that would not have been out of place in twelfth century York. House prices are over inflated because people are now able to borrow vast sums of money (up to ten times their salaries!). The words “credit control” appeared on the screen. The panellists happily discussed whether there should be a cap on the amount one is allowed to lend. Apparently, it is the job of the lender to lend responsibly. I had always though that it was the job of the borrower to borrow responsibly – it is they, after all, who must meet the repayments or lose their house – but nobody spoke up for the freedom of the individual to borrow whatever sum they deem necessary (or desirable) to make whatever arrangements they see fit.
At one point the Newsnight team mentioned property taxes. Apparently, they solve the whole problem. But Middle England wouldn’t like it, so it was brushed aside with a politically expedient waive. There was only one thing for it, they concluded. A nice house price crash will sort it out; but lets hope its not too hard, added the politicians.
It is a shame that Dan Rogerson was not available, as a Lib Dem might have tried to keep the discussion about property taxes alive for just a little longer. Like the issue of road user pricing (which is a Lib Dem manifesto pledge, though we have cooled to it since two million people signed a petition objecting to it), it is the right policy and one that needs to be defended, explained and pursued.
Land is a finite resource that owes nothing to the ingenuity or effort of mankind. It has more in common with fossil fuels or spectrum band-width than labour or capital. Because it is both limited and essential (unless one is a pirate radio station), it’s value constantly rises as society grows richer: money chases more and better goods, so prices actually fall in real terms (imagine how much a brand new ZX Spectrum would be worth now – kitsch value aside); wealth outstrips population growth, so real incomes slowly rise; but land is static, so rising wealth and demand must push prices up. Land value inflation is inevitable.
The most efficient way to prevent land becoming the preserve of the wealthy few (which George argues must inevitably lead to the impoverishment of those who do not own land, as any extra wealth they produce will be taken in rent) is for the state to capture rent and distribute it among the populous. The Lib Dem proposals are rather more modest; they would tax property values at 1 per cent per annum, with a view in the long-run to taxing only land values and not the value of improvements.
The result would be to calm house price fluctuation. It would discourage hoarding; it would be costly to own land that was not in use. It also rewards improvement: a field would have the same land tax whether or not a block of flats were built on it, so the owner’s interest would be in developing his land. It would capture a proportion of the wealth (as opposed to income) that would otherwise entrench privilege in families, and would capture unearned income (that deriving just from owning a rising asset). From an economic perspective, it would have a far more benign effect than taxation of labour or capital, both of which we should encourage. And it is devilishly hard to evade.
Middle England’s objection comes primarily from the fear that it will lead to a net increase in taxation. This is – or at least, ought to be – misguided. If land value taxation were the preserve of local authorities, it could replace the hated Council Tax. If it yielded higher returns than the Council Tax, the Government should respond by reducing the grant it gives local authorities and tax labour and capital correspondingly less (that is to say, reduce income, capital gains and business taxes). This would additionally hand much more fiscal authority to councils and so promote the devolution agenda. Tax changes should be at worst neutral, but would be altogether fairer, simpler, greener, more local and more efficient. Sound familiar?
Newsnight devoted most of their programme last night to housing. (Not that you’d guess by reading the first comment on the Newsnight blog, which drips anti-Semitic bile). Gavin Estler chaired a debate between Housing Minister Yvette Cooper, a Tory shadow less aristocratic than Michael Gove, the owner of a chain of estate agents and somebody from pricedout.org. It was interspersed with a few reports.
In the first instance, just about everybody agreed that more housing was needed. The Government recognised that 220,000 new houses were needed each year, but blamed Tory councils for blocking planning permission. One commentator then noted that it had taken the Government ten years to raise house-building from 100,000 to 110,000, whereas in the 1950s the Tories managed to raise house-building from 200,000 to 300,000 in a couple of years. The lady from pricedout.org agreed that more housing was needed. Everybody agreed that there was a supply problem, but nobody explained how it was to be solved, or why we are tearing down houses in the North of England while building new ones in the South.
There followed a series of truly bizarre proposals, including the usual anti-capitalist assault on second-homers and those buying to let (in an example of economic illiteracy, Ms. pricedout argued that more supply would merely be mopped up by wealthy buy-to-let landlords and so would not benefit first time buyers, which showed a total ignorance of the most basic principle of economics). Poor hippies could no longer afford to buy houses in the bohemian paradise of Totnes, lamented one Newsnight reporter, who seemed to wilfully ignore the fact that those selling their houses to property magnates and .com millionaires were the very hippies and artists who had given the place its character, and were now happily cashing in on the very material windfall that they had enjoyed.
It’s all the fault of the money-lenders, went up a cry that would not have been out of place in twelfth century York. House prices are over inflated because people are now able to borrow vast sums of money (up to ten times their salaries!). The words “credit control” appeared on the screen. The panellists happily discussed whether there should be a cap on the amount one is allowed to lend. Apparently, it is the job of the lender to lend responsibly. I had always though that it was the job of the borrower to borrow responsibly – it is they, after all, who must meet the repayments or lose their house – but nobody spoke up for the freedom of the individual to borrow whatever sum they deem necessary (or desirable) to make whatever arrangements they see fit.At one point the Newsnight team mentioned property taxes. Apparently, they solve the whole problem. But Middle England wouldn’t like it, so it was brushed aside with a politically expedient waive. There was only one thing for it, they concluded. A nice house price crash will sort it out; but lets hope its not too hard, added the politicians.
It is a shame that Dan Rogerson was not available, as a Lib Dem might have tried to keep the discussion about property taxes alive for just a little longer. Like the issue of road user pricing (which is a Lib Dem manifesto pledge, though we have cooled to it since two million people signed a petition objecting to it), it is the right policy and one that needs to be defended, explained and pursued.
Land is a finite resource that owes nothing to the ingenuity or effort of mankind. It has more in common with fossil fuels or spectrum band-width than labour or capital. Because it is both limited and essential (unless one is a pirate radio station), it’s value constantly rises as society grows richer: money chases more and better goods, so prices actually fall in real terms (imagine how much a brand new ZX Spectrum would be worth now – kitsch value aside); wealth outstrips population growth, so real incomes slowly rise; but land is static, so rising wealth and demand must push prices up. Land value inflation is inevitable.
The most efficient way to prevent land becoming the preserve of the wealthy few (which George argues must inevitably lead to the impoverishment of those who do not own land, as any extra wealth they produce will be taken in rent) is for the state to capture rent and distribute it among the populous. The Lib Dem proposals are rather more modest; they would tax property values at 1 per cent per annum, with a view in the long-run to taxing only land values and not the value of improvements.
The result would be to calm house price fluctuation. It would discourage hoarding; it would be costly to own land that was not in use. It also rewards improvement: a field would have the same land tax whether or not a block of flats were built on it, so the owner’s interest would be in developing his land. It would capture a proportion of the wealth (as opposed to income) that would otherwise entrench privilege in families, and would capture unearned income (that deriving just from owning a rising asset). From an economic perspective, it would have a far more benign effect than taxation of labour or capital, both of which we should encourage. And it is devilishly hard to evade.
Middle England’s objection comes primarily from the fear that it will lead to a net increase in taxation. This is – or at least, ought to be – misguided. If land value taxation were the preserve of local authorities, it could replace the hated Council Tax. If it yielded higher returns than the Council Tax, the Government should respond by reducing the grant it gives local authorities and tax labour and capital correspondingly less (that is to say, reduce income, capital gains and business taxes). This would additionally hand much more fiscal authority to councils and so promote the devolution agenda. Tax changes should be at worst neutral, but would be altogether fairer, simpler, greener, more local and more efficient. Sound familiar?
Thursday, 18 January 2007
EXCLUSIVE: Mervyn DID draft a letter to Gordon!
It's amazing what one finds in the rubbish bins behind Threadneedle Street!
Obviously the person who drafted this letter realised they didn't quite need it after all:
Dear Gordon,
As you may have noticed, inflation appears to be spiralling out of control. The consumer price index (CPI) is now at its highest since 1995, while the retail price index (RPI) is at its highest since 1991. I imagine it must be pretty embarrassing, presiding over an economic record worse than that of the Major administration, which Labour have been criticised so vocally over the past decade.
I feel duty bound to provide an explanation for this rising inflationary tide. I attribute it to a number of key factors, none of which are beyond the wit of man to cure.
1. House prices
House prices have spiralled over the past decade. This has a direct impact on RPI and has also facilitated unprecedented levels of equity withdrawal, fuelling consumer price rises.
House price rises are largely to do with property speculation. While interest rates can curb house prices to a degree, they are a blunt tool in that they also affect other lending and borrowing. High interest rates would, for example, reduce investment. One means of curbing property speculation without harming investment would be to introduce land value taxation, which economists recognise is among the least distortionary form of taxation. Sadly, the Government has shown no willingness to investigate this option.
2. Public spending
A grotesque rise in public spending over the past five years has increased inflation. A particularly egregious example has been overly-generous public sector pay rises that bear no relation to productivity gains.
3. Public borrowing
The Pre-Budget Report forecasts net debt at the end of March 2007 of £503.9 billion. This budgetary imprudence has injected massive liquidity into the public sector and the economy more widely. Effectively, more money is chasing the same number of goods.
4. Taxes
In the pre-budget report the Government added 1.5p/litre to petrol duty. This has been the major factor in the 2p rise in the cost of a litre of petrol, which in turn accounts for two-thirds of the rise in CPI last month.
5. Trade barriers
Cheap imports of goods from emerging Asian manufacturers has applied downward pressure on prices, particularly in clothing and electrical goods. Sadly, the Government and the European Commission (led by Trade Commissioner Peter Peter Mandelson) have imposed additional and ongoing quotas on Chinese textile imports. This is in breach of our commitments under the World Trade Organisation. The result is that customers have been forced to purchase more expensive European products, pushing up retail prices.
6. Immigration
The low inflation enjoyed by the UK over the past two years has been in part due to immigration. As my colleague, David, pointed out a couple of weeks ago, the availability of highly skilled Eastern European workers has kept wage demands within sensible limits. Sadly, the Government has decided not to take advantage of another wave of immigration from Romania and Bulgaria, instead imposing a daft and distortionary quota system. This has removed a further buffer against inflation.
As you will see from the above factors, there is a clear single cause of inflation. Sadly, it is beyond my authority to do anything about it. I think it’s over to you, old chap.
I remain your humble servant,
Mervyn.
Obviously the person who drafted this letter realised they didn't quite need it after all:
Dear Gordon,
As you may have noticed, inflation appears to be spiralling out of control. The consumer price index (CPI) is now at its highest since 1995, while the retail price index (RPI) is at its highest since 1991. I imagine it must be pretty embarrassing, presiding over an economic record worse than that of the Major administration, which Labour have been criticised so vocally over the past decade.
I feel duty bound to provide an explanation for this rising inflationary tide. I attribute it to a number of key factors, none of which are beyond the wit of man to cure.
1. House prices
House prices have spiralled over the past decade. This has a direct impact on RPI and has also facilitated unprecedented levels of equity withdrawal, fuelling consumer price rises.
House price rises are largely to do with property speculation. While interest rates can curb house prices to a degree, they are a blunt tool in that they also affect other lending and borrowing. High interest rates would, for example, reduce investment. One means of curbing property speculation without harming investment would be to introduce land value taxation, which economists recognise is among the least distortionary form of taxation. Sadly, the Government has shown no willingness to investigate this option.
2. Public spending
A grotesque rise in public spending over the past five years has increased inflation. A particularly egregious example has been overly-generous public sector pay rises that bear no relation to productivity gains.
3. Public borrowing
The Pre-Budget Report forecasts net debt at the end of March 2007 of £503.9 billion. This budgetary imprudence has injected massive liquidity into the public sector and the economy more widely. Effectively, more money is chasing the same number of goods.
4. Taxes
In the pre-budget report the Government added 1.5p/litre to petrol duty. This has been the major factor in the 2p rise in the cost of a litre of petrol, which in turn accounts for two-thirds of the rise in CPI last month.
5. Trade barriers
Cheap imports of goods from emerging Asian manufacturers has applied downward pressure on prices, particularly in clothing and electrical goods. Sadly, the Government and the European Commission (led by Trade Commissioner Peter Peter Mandelson) have imposed additional and ongoing quotas on Chinese textile imports. This is in breach of our commitments under the World Trade Organisation. The result is that customers have been forced to purchase more expensive European products, pushing up retail prices.
6. Immigration
The low inflation enjoyed by the UK over the past two years has been in part due to immigration. As my colleague, David, pointed out a couple of weeks ago, the availability of highly skilled Eastern European workers has kept wage demands within sensible limits. Sadly, the Government has decided not to take advantage of another wave of immigration from Romania and Bulgaria, instead imposing a daft and distortionary quota system. This has removed a further buffer against inflation.
As you will see from the above factors, there is a clear single cause of inflation. Sadly, it is beyond my authority to do anything about it. I think it’s over to you, old chap.
I remain your humble servant,
Mervyn.
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