Saturday, 27 August 2011

Explain The Difference

The three-bed semi detached houses advertised for sale in Yorkshire shown below are phsyically very similar, the rebuild cost of the most expensive one advertised is probably only about £50,000 more than the rebuild cost of the cheapest one. I've linked them through to the actual advert at Rightmove, in case any of them takes your fancy.

So I think it's safe to say - whether you're a Home-Owner-Ist or a Georgist - that the huge differences in price are dictated by location (mainly the local jobs market; but also whether it's a 'nice neighbourhood' and how nice the views are); the size of the plot; and an element of scarcity value (which is to a large extent proportional to plot-size). Absolute prices are all influenced by the availability of credit so we can ignore that as a factor for the purposes of this exercise.

Three-bed semi, Doncaster, £87,000:Three-bed semi, Leeds, £150,000: Three-bed semi, York, £200,000: Three-bed semi, Harrogate, £250,000:Three-bed semi, Leeds, £285,000:Three-bed semi, Guisborough nr. Middlesbrough, £325,000: Three-bed semi, Horsforth nr. Leeds, £410,000:


Anonymous said...

The difference is simple. there are stupid people that will pay upwards of half a million pounds for a house and there are those that won't. if there were no one willing to pay the asking price the house would not sell subsequently, the owners would have to drop the price or stay put.
In the Boston area of the US houses are selling for as little as $10,000 - I can see the same happening here and as a HOME owner I welcome it.

Sean said...

The Doncaster one is interesting as Donny is only 1.40mins to 2 hours commute into the city of London, so I guess if you look upmarket round donny, Bawtry ect, you will find the 5 beds plus paddock type house is well out of sync with the bottom end of the market.

Down the road Sheffield Hallam probably proves you economic point, >The 2004 Barclays Bank Financial Planning study revealed that, in 2003, the Sheffield district of Hallam was the highest ranking area outside London for overall wealth, the proportion of people earning over £60,000 a year standing at almost 12%< (from wiki)

Now 60k is probably not a lot in the professional world in the south, but as homes are much cheaper here you pay your mortgage off quicker and then your cash is yours, and it happens in Hallam more than anywhere else.

Me I sold out to a very lefty university prof, and moved out to the peak long ago, but now we have over paid BBC types based in Salford pushing up prices (or at least holding them steady in the current climate) driving the market with their 100% professional mortages.

So yes bullseye, tax land not income!

Anonymous said...

Hehe...have you also included design/creative right into the price?
The last one certainly look nicer than the above... people pay a lot more money for Mac while PC do more or less the same thing because of the styling casing... why not for houses ?

Derek said...

@Anon1, that's the rebuild cost for a small wooden house in the Boston area. The land must be worth zero there too. Can't really see it happening in the UK unless 100% LVT is implemented and planning regulations are relaxed significantly.

Anonymous said...

Anonymous 18:22

People buying a mac seem to be paying a premium for the lower quality hardware they get in their Macs. I always put it down to stupidity.

There's a lot more range of prices in the PC end of things. My self build PC cost 2,500 quid.

Tattyfalarr said...

"Explain The Difference"

Easy peasy. Neighbours.

Mark Wadsworth said...

Anon 1, if the differences were all down to stupidity or vanity, then that's all the more reason for taxing land values. As Derek says, I doubt that house prices will fall quite as much in the UK as in Boston.

Sean, so I guess that Hallam is quite expensive compared to surrounding area?

Anon 2 & 3, the reason people buy Mac's is because unlike PCs they "don't keep crashing". That's all. Secondly, the prices for PCs or Macs are the same around the country and pretty similar across the world. They con't cost five times as much in Horsforth as in Doncaster. And finally, the difference in build cost between top and bottom is probably only about £50k.

Tatty, yes, "nice neighbours" is one of the things that makes an area more expensive, but there's more to it than that.

Deniro said...

The high price of residences is a symtom not the cause of the way land is used in this country. A huge amount of land in this country is unused. And a lot of that receives funds from the C.A.P. With LVT plus citizen income netting off , what you are really trying to do is to tax the unuse of land, so why not do it dirrectly by selling house- building -planning- permision directly to those holding it.

Mark Wadsworth said...

Den, I'm always up for a thought experiment, what do you envisage?

Deniro said...

Selling House-Building-planning permision to those holding unused land.

Mark Wadsworth said...

Den, that's the same as charging a higher rate of LVT on land once its value is increased by getting planning permission.

A lot of councils auction off planning permission by the back door, it's an OK way of raising money but it's still better for the council to receive an annual stream of small payments than a one-off lump sum.

Deniro said...

New Statesman article

I was thinking of pro-actively approaching the people reffered to in the New Statesmen articlewith planning permission in return for a slice of what they get from the property development company. That way land is brought into use , money is raised (taxes relaxed elsewhere, ) and the the people holding the previously unused land have a large sum of money rather than a tax bill.

Mark Wadsworth said...

Den, as Dave Wetzel explains in that article:

“All Labour governments since the Second World War have tried to tax 'planning gain' with a development land tax, but this has failed because it is easy for landowners to avoid a one-off tax that only arises when a development takes place. With an annual land value tax, the income is collected whether or not a development happens."

James Higham said...

Middlesborough - my goodness! Who'd wish to live there?