In British and American cities, population growth has vastly outstripped residential property construction for decades. This is basic demand and supply - if demand grows by more than supply grows, the price goes up.
Real economies are more complex than simple supply and demand curves.
The number of houses is outpacing population growth across the developed world, so by your simple logic house prices should be going down. France has a whopping 55 houses per 100 people today, compared to 45 in 1980. For Britain it went from 40 to 44.
But the main reason for house prices going up is increased demand for houses… as investments.
Growing wealth has meant people look for places to store their money and stones are a favoured investment.
Somehow a lot of westerners recognize this when they see the Chinese ghost cities, but the exact same thing happens in developed countries, except the houses are rented out as AirBnBs or rented to students, etc.
I don’t know why you keep talking about China. China’s construction bubble is irrelevant to the UK. We haven’t had anything comparable to a construction bubble. We suffer from a structural and well-documented lack of housing in the places where people want to live.
In the 20 years before Covid, our population grew by 8.4 million but we only built 3.6 million new dwellings. The population growth also skews towards London and the South and there is an acute shortage of properties here - and this is where house prices have most acutely diverged from incomes. I calculated the other day that there is nowhere in London where a two-person minimum wage household can afford the average rent; contrast that with Tokyo, where the authorities have permitted construction of new homes and expansion of the city as the population has grown, and where a minimum wage couple could afford the average rent in around 1 in 4 of the city’s wards.
Between the 1930s and 1970s (with the obvious exception of WW2), we were consistently building around 300-400k homes a year in the UK - at a time when population growth was lower than it has averaged in the first quarter of the 21st century. That started to tail off with the economic crises of the 1970s and 1980s and has never recovered. A decade ago, we were building barely 130-140k homes a year. Going in to Covid, that figure had only just grown to 200k a year. These aren’t sustainable numbers for a population that is growing and that is structurally moving southwards.
We need to build homes in the places people want to live. Instead governments have given us nonsense like Help to Buy that uses state subsidies to boost the demand for housing in the laughable name of affordability. The sustainable solution is to subsidise the supply - i.e. build.
In British and American cities, population growth has vastly outstripped residential property construction for decades. This is basic demand and supply - if demand grows by more than supply grows, the price goes up.
So tell me how building “any” new homes reduces prices, because that’s what the title says (article is paywalled)
Also, between 2011 and 2021 the population in England and Wales grew by 6% while the housing stock grew by 8%.
Guess what the housing prices did?
Do we just spout high school level economic conjectures as truth without consulting actual easily Googled figures nowadays?
Increasing supply reduces the price - always.
Increasing demand increases the price - also always.
If we’d not built any homes in recent decades, prices would be dramatically higher than they are currently. This is primary school economics.
Do you want to explain through what mechanism you think supplying more houses leads to houses becoming more expensive?
Economics is not a subject in primary school…
Real economies are more complex than simple supply and demand curves.
The number of houses is outpacing population growth across the developed world, so by your simple logic house prices should be going down. France has a whopping 55 houses per 100 people today, compared to 45 in 1980. For Britain it went from 40 to 44.
But the main reason for house prices going up is increased demand for houses… as investments.
Growing wealth has meant people look for places to store their money and stones are a favoured investment.
Somehow a lot of westerners recognize this when they see the Chinese ghost cities, but the exact same thing happens in developed countries, except the houses are rented out as AirBnBs or rented to students, etc.
You’re describing a demand effect - people demand property as an asset class so the price goes up.
For any level of demand, increasing the supply will decrease the price.
Ok, so you just want to build Chinese ghost cities, gotcha.
I want to increase the supply of X, so the price of X becomes lower.
X happens to be houses in this case, but it could be food, clean water, medicines, etc - I want to make the basic necessities of life more affordable.
Yeah, maybe learn a little bit more how markets work then.
The ghost cities of China didn’t make housing more affordable in China.
To make housing affordable, it has to move back from being an investment to becoming a commodity.
Building more won’t solve that, as the data shows.
I don’t know why you keep talking about China. China’s construction bubble is irrelevant to the UK. We haven’t had anything comparable to a construction bubble. We suffer from a structural and well-documented lack of housing in the places where people want to live.
In the 20 years before Covid, our population grew by 8.4 million but we only built 3.6 million new dwellings. The population growth also skews towards London and the South and there is an acute shortage of properties here - and this is where house prices have most acutely diverged from incomes. I calculated the other day that there is nowhere in London where a two-person minimum wage household can afford the average rent; contrast that with Tokyo, where the authorities have permitted construction of new homes and expansion of the city as the population has grown, and where a minimum wage couple could afford the average rent in around 1 in 4 of the city’s wards.
Between the 1930s and 1970s (with the obvious exception of WW2), we were consistently building around 300-400k homes a year in the UK - at a time when population growth was lower than it has averaged in the first quarter of the 21st century. That started to tail off with the economic crises of the 1970s and 1980s and has never recovered. A decade ago, we were building barely 130-140k homes a year. Going in to Covid, that figure had only just grown to 200k a year. These aren’t sustainable numbers for a population that is growing and that is structurally moving southwards.
We need to build homes in the places people want to live. Instead governments have given us nonsense like Help to Buy that uses state subsidies to boost the demand for housing in the laughable name of affordability. The sustainable solution is to subsidise the supply - i.e. build.