Political Chick
© 2021
Site by
Memiah Limited

House Prices

Over the past 10 years since Labour came into power house prices have risen over 200% across the UK. This is great news for home owners, and particularly the older generation who have purchased a house before or during the earlier years of this period. It’s not so great for the ones who have only just gotten on to the property ladder, and for young people who are looking to buy their first home now, the situation is dire. House price to income ratios are now astronomical at something like 10 times earnings.

Yet people seem to have been brainwashed in to thinking that rising house prices are always a good thing. If the price of any other essential commodity was rising this fast there would be outrage (imagine food rising at 20% a year), so why is it acceptable for the equally essential roof over our head? Well, quite simply, it’s because people treat housing as an asset, and in a lot of cases it’s their one and only asset. Pension funds and stocks have been going through a rough few years and only recently have they recovered to their pre-2001 levels, so rightly or wrongly people have been ploughing money into housing at an unprecedented rate. A lot of people will depend on equity in their house to pay for their retirement.

During this time Labour has been more than happy to sit back and let it happen, as rising house prices have meant that people feel richer and therefore spend more thus keeping away a recession, and allowing the chancellor to claim the longest period of economic growth for more than 100 years.

However, even if you are an existing home owner, unless your next move will be trading down to a smaller property, or selling up all together, you won’t truly gain from any house price rises. In fact, if you have ambitions to live in a bigger property, then rising prices are only making your next house even more expensive, meaning you will have to borrow even more to get that dream home.

So why are people convinced that prices will never fall (even though they have for several periods in the last 40 years)? Well, the mainstream media are the main culprits. If you look through most newspapers you will find they are pasted in adverts from property companies; property seminars, estate agents, mortgage companies etc.. All these advertisers have a vested interest in talking up the property market. If house prices were to nose dive, the newspapers know that at best these companies will cut back their advertising budgets, and at worst a lot of them will go bust all together, which would damage their profits.

So it’s in the newspapers interest to keep home buyers confident in the stability of the market, and this is reflected in their articles. In fact, even The Times of all papers was recently criticised in the way it manipulated an interview with BBC Economics Editor, Evan Davis to imply that he thought houses were a safe bet. It turns out he actually thinks they will probably fall, and has set out why a house price crash could be beneficial in an article on BBC news.

So how do we solve the housing problem? It’s clear that restrictive planning is a major cause, so for a start we need a major overhaul of our planning system to make it easier to build new homes. On top of that, we should probably put stricter lending criteria on loans and mortgages.

The BBC recently aired a well-balanced news piece on the 10 O Clock News:

If you feel as passionate about this subject as me, then you should join the debate over at the House Price Crash forum. You should also vote for this issue on webcameron to see if we can get David Cameron to raise the issue in the house of commons.

Comments are closed.