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.
I just explained that Britain has been moving structurally southwards.
You’re imagining a scenario where national population growth is perfectly distributed to where houses are - what’s actually happening is that some places are shrinking or steady, and other places (London and the SE) have been growing a lot. You need to build homes for the growth in the national population and you need to build additional homes in London and the SE for the people moving to these regions from the rest of the UK and you need to continually upgrade or replace elements of the housing stock nationally that are no longer fit for purpose in 2023.
Increasing the supply of housing is always going to decrease the price. The only reason you’ve cited for not increasing the supply is your fantasy scenario where a country suffering from historically low levels of housebuilding might somehow find itself in the midst of a Chinese-style construction bubble (and at a time of tightening monetary policy FFS…) I can’t understand why you’re against the one thing that is proven to decrease prices. An affordability crisis and a supply crisis are the same thing.
I am all for dissenting discourse, but there is no need to be rude or insult anyone’s intelligence.
China’s “Ghost cities” are of a completely different circumstance. They were built and funded with very flawed data that assumed the sites had the demand to fill them. This was obviously not true, and companies like Evergrande are facing the consequences.
The problem is that housing has not been built where people actually want or need to live. You can build an entire city in the middle of nowhere, and if people don’t want or need to live there, then it will remain empty.
Building housing in places like London, New York, Los Angeles, Paris, Tokyo, etc, can only do good for the average person because it brings down demand and people actually want to live there.
The “Ghost Cities” in China do not meet this criteria; they were built where nobody wanted to live, and now they are suffering the consequences. They are stuck trying to sell/rent apartments at rates people simply won’t pay because the area they were built is not desirable enough. The builders made a bad business decision.
The amount of housing in a particular area needs to be proportional to the demand to live in that same particular area.
The other guys started the rude shit, I’m taking no accountability for that.
You are more polite, but have exactly zero data to back up your position.
Anyone who looks at the data can see that, even in high demand places like London, there is no actual shortage of housing.
Yes, the point is that Chinese Ghost cities are absurd, but the mechanics of an artificial real estate bubble also worked through in places like Beijing and Shanghai, and also London.
It would be a societal error to further prop up the bubble by building more without solving the structural issues that have turned real estate into an asset bubble when housing should be a commodity.
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.
Well good luck with that. You don’t understand the problem, so you’re never gonna see the solution.
And you also suck at math.
8.4 million extra people, with 3.6 million extra houses is 2.33 persons per house. The average UK household size is 2.36.
There is no housing shortage. There is an affordability crisis.
I just explained that Britain has been moving structurally southwards.
You’re imagining a scenario where national population growth is perfectly distributed to where houses are - what’s actually happening is that some places are shrinking or steady, and other places (London and the SE) have been growing a lot. You need to build homes for the growth in the national population and you need to build additional homes in London and the SE for the people moving to these regions from the rest of the UK and you need to continually upgrade or replace elements of the housing stock nationally that are no longer fit for purpose in 2023.
Increasing the supply of housing is always going to decrease the price. The only reason you’ve cited for not increasing the supply is your fantasy scenario where a country suffering from historically low levels of housebuilding might somehow find itself in the midst of a Chinese-style construction bubble (and at a time of tightening monetary policy FFS…) I can’t understand why you’re against the one thing that is proven to decrease prices. An affordability crisis and a supply crisis are the same thing.
Look, I’m not British, if you want to further prop up a real estate bubble, go ahead.
To see what an actual housing shortage looks like, post-WW2 is a more realistic example.
Housing wasn’t expensive, it just wasn’t available.
Nowadays, there is a lot of available housing, it’s just not affordable.
The correct policy under these circumstances is smarter regulations. That’s what the main policy changes are in my country (the Netherlands).
I guess we will see how the UK and the Netherlands compare in 2030.
I am all for dissenting discourse, but there is no need to be rude or insult anyone’s intelligence.
China’s “Ghost cities” are of a completely different circumstance. They were built and funded with very flawed data that assumed the sites had the demand to fill them. This was obviously not true, and companies like Evergrande are facing the consequences.
The problem is that housing has not been built where people actually want or need to live. You can build an entire city in the middle of nowhere, and if people don’t want or need to live there, then it will remain empty.
Building housing in places like London, New York, Los Angeles, Paris, Tokyo, etc, can only do good for the average person because it brings down demand and people actually want to live there.
The “Ghost Cities” in China do not meet this criteria; they were built where nobody wanted to live, and now they are suffering the consequences. They are stuck trying to sell/rent apartments at rates people simply won’t pay because the area they were built is not desirable enough. The builders made a bad business decision.
The amount of housing in a particular area needs to be proportional to the demand to live in that same particular area.
The other guys started the rude shit, I’m taking no accountability for that.
You are more polite, but have exactly zero data to back up your position.
Anyone who looks at the data can see that, even in high demand places like London, there is no actual shortage of housing.
Yes, the point is that Chinese Ghost cities are absurd, but the mechanics of an artificial real estate bubble also worked through in places like Beijing and Shanghai, and also London.
It would be a societal error to further prop up the bubble by building more without solving the structural issues that have turned real estate into an asset bubble when housing should be a commodity.
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