Tuesday, 4 February 2014

Price and non-price rationing

Civitas, a reliably dusty old right-wing authoritarian think-tank have, somewhat to my surprise, published this:

Overseas investment in London homes must be curbed to help reduce rampant house price inflation and ease the housing shortage, a new Civitas report says.

The UK property market is being used as an investment vehicle by the global super-rich while hundreds of thousands of younger residents are being priced out of the market and rents are eating into more and more of people's salaries.

A Civitas paper published today calls for new restrictions on overseas buyers seeking to use London's limited housing stock purely for investment purposes.

The think tank says that non-residents of the UK should only be allowed to purchase a property here if that investment will add to the number of homes.

The idea reflects the system in place in Australia, where all non-residents wishing to purchase property must apply to that country's Foreign Investment Review Board (FIRB).

While I agree with the general sentiment, this sort of non-price rationing never works of course.

People always find ways round it - as a matter of fact, "the global super-rich" have been primarily buying new-build homes - as the full report says* (and leaving them standing empty). And how on earth would you prove that somebody bought something "purely for investment purposes"? How many days a year would somebody have to live in a home to get round the rules?

And isn't the whole basis for Home-Owner-Ism that people buy housing, whether to live in or rent out, for "investment purposes"? How come that's a bad thing all of a sudden?

Price rationing would work far better - can anybody think of a way of getting those of "the global super-rich" who own land and buildings in London to compensate "hundreds of thousands of younger residents" via the tax system?

And if we agree with the general principle, why shouldn't the same apply to wealthy Londoners snapping up second homes and holiday homes in the South West or on the South Coast?

* "The new-build market in central London is dominated by interest from overseas, meaning that even relatively well-paid young people wanting to buy their own home now struggle to do so...

There are even warnings that, as well as driving up prices for domestic buyers, the nature of investments from overseas is distorting house-building priorities, with developers disproportionately attracted to high-value developments while ignoring the undersupply at lower levels of the market...

Unfortunately, not only is the government’s default setting to quietly encourage house price growth, it is also to do nothing that would impede overseas investment – without regard to whether it is having a deleterious effect."


neil craig said...

There is remarkably little high rise housing across London (compared, for example, to Glasgow.

Presumably if that were allowed housing could increase several fold. If they were modular build they could be inexpensive. If LVT were applied even moreso.

Mark Wadsworth said...

NC, you got it in one. Prince Charles has a lot to answer for.

And I don't think flats are very expensive to build, £50,000 each or something, if they can do it cheaper for modular, then so much the better.

Bayard said...

"Prince Charles has a lot to answer for."

I don't think Charlie Boy gives a scooby what is built in Balham or Crouch End. I suspect it is more that the British don't like living in high-rise blocks, so they tend to be confined to the bottom of the market, where people have less choice.

Mark Wadsworth said...

B, in the natural order of things, you have skyscrapers and high rise blocks in town centres.

Charlie and his ilk go mental when they build things like The Shard near the river (i.e. near where he lives), so we end up with the high buildings scattered meaninglessly much further out.

Bayard said...

But the Shard is an office building, as is all the high-rise in the City except the Barbican. Yes, there's no high-rise next to Buck House, but there is some not far away in Victoria Street. Most of the lack of high-rise round Buck House is because the Duke of Westminster doesn't like high rise and won't build any on his land. I doubt there's much high rise in Bearsden, either (that's the posh part of Glasgow). There just isn't much non-council high rise in Britain, full stop.

Mark Wadsworth said...

B, yes, but people don't like living high rise, that's why.

I would be a bit nervous about living in a block with more than five or six storeys, I guess most people think the same (I don't know).

Unless you are super posh and insist on having the top floor 'penthouse' from which you can see for miles.