September 1, 2021 - 11:42am
According to the latest Nationwide figures, house prices went up by 2% in August. That’s something like a £5,000 increase in the ‘value’ of an average dwelling. In just one month. In the dead of summer. And Covid isn’t over yet.
But perhaps this is just a bounce-back effect. Doom-laden predictions about the slowdown of the post-pandemic economy have been proven wrong (at least so far). The entire economy is now recovering from an almighty shock, so we can expect all sorts of sudden rebounds. However, the trend in the level of house price inflation is upwards across the whole period of the pandemic.
Instant Info – Nationwide House Price Index pic.twitter.com/OCwj3jWMsl
— BuiltPlace (@BuiltPlace) September 1, 2021
In the five years immediately before Covid, the trend was heading gently downwards, getting closer to reaching some price stability. A period of zero house price inflation (i.e. no increase in prices) would have been a much needed change in the market, allowing for more people to have a fighting chance to raise a deposit and get a foot on the property ladder.
Instead, we’ve seen prices rocketing up again. To say this is contrary to expectations is putting it mildly. Last year, the Government was so worried about the property market crashing that they slashed stamp duty rates. There’s been no duty at all to pay on the first £500,000 of a purchase.
So, did Rishi Sunak’s tax holiday cause all of this? Or did the pandemic unleash inflationary forces that would, at least in part, have happened anyway? A report, last month, from the Resolution Foundation strongly suggests the latter. Indeed, with the pandemic bringing about profound changes in our economic geography, we’ve seen knock-on effects on property markets around the world. And needless to say, the financial sector has been piling in on the speculative opportunities.
However, that doesn’t get the Chancellor off the hook. Indeed, it looks like he’s just blown at least £4.7 billion on cutting a tax that clearly didn’t need cutting. And because this will have added to the inflationary mix, there’s no benefit to buyers. Instead, the gains are captured by those who make money out of property transactions — i.e. the already wealthy.
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SubscribeIt is because Johnson is so awful that people turn, in despair, to his most likely immediate replacement. They are also aware that Treasury decisions are distorted by prime ministerial whimsy. And finally, in Sunak we have an articulate, plausible and sober representative of high finance, whereas in his boss we see a floundering, shambling shyster, hastening from the last bar in old Fleet Street to the pulpits of “woke” for the sake of his flaky career. Anything’s better than that.
In which parallel universe is this man “popular”?
As one of the 3 million plus Excluded, that’s about the last thing he is …
he has spent the past eighteen months doling out money like there is no tomorrow. Of course he’s popular! Just wait and see what happens to his popularity when the bills come in.
High house prices seem to be a source of pride for many people but the long bull market will not be sustained. Just as the government curtailing investment in council housing in the 80s led to the shortage of new homes something will rebalance the supply and demand in the future, a political response to the inequality, a pandemic, an easing in planning controls, a reduction in net immigration, a substantial increase in interest rates. Markets do not go up for ever and the higher they go before they fall the greater the pain for the losers. The government should be preparing for the fall out now not supporting high prices. I am not convinced Rishi Sunak thinks through the consequence of his actions beyond the immediate political impact.
All true, and I’m sure it’s going to be painful when the drop happens (especially for shorter-term speculators) but surely it’s far better for it to occur after the Pandemic – than during it.
Will not be sustained?
At what point does the short term become the long term?
A £4.7 billion reduction in the amount taken from tax-payers (this year) doesn’t seem like an egregious sin.
If that’s one of the resulting downsides of acting to mitigate the risk of a major deterioration in economic activity – then fine.
There are plenty of other ways to tax the well off – and Sunak has already used some of them.
People are ignorant, dumb, lazy and corrupt?
“How long can it last? One day, perhaps quite soon, voters will wake up to what uncontrolled property speculation does to a country.”
It keeps Tories elected. Maintaining rising house prices is the one policy that they have always adhered too. Like all unsustainable policies it will eventually crash – But until then…
Probably a clue in relationship between loadsamoney builders and Gov. High house prices are being driven by population growth and scarce land in this badly overcrowded island with only 13% forest- lowest in Europe. Ignore the ones that say mass immigration is ok we have plenty of room for housing- they always conveniently forget industry, infrastructure, farmland, foreshore and upland. Apart from a few areas, you can pick up a really decent house in the States for $150,000 because land is cheaper. Finland the same- 5.5m pop. Plus the idea that property owners don’t vote Labour.