Listen Very Carefully- Rising house prices is not a good thing
Posted by Mark on 31st Oct 2009
At the danger of being stoned to death the next time I go into a bar in Mayfair, or getting banned from even more dinner parties in South West London, can I state a few facts, as I see them:
A housing market that rises much in excess of average earnings is bad for economic mobility, social cohesion and acts as a tax by the old on the young. Trying to explain to my dad this week, admittedly after a couple of pints of Guinness, that the fact that my younger brother cannot buy a decent home for his young family is a direct consequence of my parents sitting on a huge "unearned" gain on their house did not go down nearly as well as the beer had been.
Yes the news that prices are now growing again at 6.00% pa is a bad thing.
Unfortunately, residential capital values bear no relation to rental values, a fact that will strangle at birth the concept of residential REITS far more effectively than governmental lack of interest. Which is shame as they would solve a number of the above problems.
But our collective mania when it comes to bricks and mortar will be near impossible to shake, the most obvious solution, a capital gains tax on primary residences, would never get any government elected. So we'll continue to swing from boom to bust; canny investors will make a packet, poor ones will bring down banks and the man on the Clapham Omnibus will feel fine as long as the value of his primarily, and many cases sole, investment keeps up with the Jones.
And I no longer have to worry about my brother.
I've been cut out of the will.