31/07/16: How to bring over-inflated house prices back to earth
There are just two linked reasons that provide about 80% of the reason why houses are so affordable in so many parts of the world. They explain a seriously bizarre prediction about how to get change.
Reasons for Unaffordability
1. Supply of Money
For all sorts of very necessary reasons, bankers have a great influence over where the money supply in an economy is directed. This is important, because the more money that is directed towards one product over another, the higher its price become.
In the UK, the amount banks and credit card companies lend to us that is unsecured is just about equal to the lending that is secured. It means that money to buy property and maintain its price is hugely favoured over money to buy almost anything else. This unbalanced money supply is a tidal influence in the price of housing.
The single most important reason why banks favour secured property is there is currently no better way for them to ensure repayment. It is a long time since trust played any part in the calculation. If we can change the level of trust in society, we can help create a supply of money that is more evenly balanced. The level of trust is a direct reflection on the balance of our behaviours towards each other.
2. Supply of Housing
Prices are dependent on the supply of housing. There is not enough to go round. I know some people like to blame immigrants for this. They are wrong for this reason.
In the Noughties, the identical plot of land would cost £10,000 with agricultural permission, £200,000 with office use, and £2,400,000 with residential use. Today, less than 3% of land in the whole of the UK has residential use. The limitations in supply of land relative to demand has almost nothing to do with immigrants, and almost everything to do with pressure we voters and vested interests put on politicians.
The single most immediate way to bring houses down is to create the conditions where politicians know that they will be elected if they ease the obscene restrictions that favour the living conditions of our animals over our families.
Politicians respond to the preferences of their voters. House prices are a direct reflection of our attitudes. Most of us get furious when we think of the “haves” having no regard for the “have nots”. Of course, many of today’s “haves” are often the very parents of the “have nots”. Changing our own attitudes is what makes a difference, not getting heated about the attitudes of others.
Mapping the Wood through the Trees
The full reasons that determine the actual price of housing are complex, so the two reasons above are not the whole picture. But they are most of it.
Predicting house prices has parallels with predicting the weather. There are too many factors that affect the weather to allow reliable weather forecasting more than a handful of days ahead. But there is one weather-related prediction that is almost 100% certain. When the moon swings, the tide turns. In tide theory, the overriding principle is the water is pulled in line with the moon.
When it comes to house prices, there are also so many influences on how we choose to spend our money that prediction is also unreliable. But if you want to cut to the chase, here is the equivalent perspective. In housing theory, the overriding principle is that house prices are pulled in line with self-interest.
The prediction is this. The affordability of house prices is directly linked with the level of self-interest we jointly lay within the bed of the communities we live and work in. They are the same communities of family, friends, neighbours and work that sustain and determine our future. Securing better communities will secure for each of us a better life.
Most of our behaviour is based on the behaviour of those around us. If we choose to attach equal importance to ourselves as to those around us, we will behave in ways that balance our immediate needs with the needs of our sustaining communities. How we behave as individuals is one of the many behaviours that influence everyone we come across. If enough of us become more balanced between caring for ourselves and caring for others, there are huge benefits for ourselves and for society. One benefit, in particular, is to stop house prices literally going through the roof.