Brexit and the waning days of the United Kingdom

[Josquius]

The average house price in London is £470K, compared to £210K for the UK as a whole.

Don't forget that houses are half the price but salaries are also half the amount :p

My hometown actually has the lowest prices in the UK, more around the 100k mark, often less if you go to the outlying villages (my cousin is selling her place for 60k). Most of the people I grew up with are homeowners. Though you'd have to pay me to live there.

[Gups]

The average house price in London is £470K, compared to £210K for the UK as a whole.

Don't forget that houses are half the price but salaries are also half the amount :p

Not if you're a teacher, a firefighter, a cop, or a nurse.

[Sheilbh]

I refuse to believe there is anyting more at play then too restrictive building permit regulations.

There can hardly be any more lucrative places for investments in building housing than London and SE England, in Europe for sure. Yet it's just not happening even close to meeting demand. This has to be an artificial barrier raised between potential investors and the market

Planning's expensive and there's the green belt. Lots of brownfield land is contaminated from its industrial past and even now prices are nowhere near high enough to meet the cost of remedying it. Also I'd imagine there's nowhere near enough finance available from the banks to meet population demand.

But if you look at that chart of housing starts in post-war UK the private starts are in a fairly regular area of 150-200k a year, so there may be structural issues with the demand too - my biggest guess would be lack of finance?

[The Larch]

I refuse to believe there is anyting more at play then too restrictive building permit regulations.

There can hardly be any more lucrative places for investments in building housing than London and SE England, in Europe for sure. Yet it's just not happening even close to meeting demand. This has to be an artificial barrier raised between potential investors and the market

Planning's expensive and there's the green belt. Lots of brownfield land is contaminated from its industrial past and even now prices are nowhere near high enough to meet the cost of remedying it. Also I'd imagine there's nowhere near enough finance available from the banks to meet population demand.

But if you look at that chart of housing starts in post-war UK the private starts are in a fairly regular area of 150-200k a year, so there may be structural issues with the demand too - my biggest guess would be lack of finance?

From the graph you posted it looked like the problem is that local authorities have basically stopped building public housing since the 90s.

[Sheilbh]

Agreed. The right to buy that caused that is currently being extended to housing associations too, so that red strip will probably disappear too.

[Gups]

I refuse to believe there is anyting more at play then too restrictive building permit regulations.

There can hardly be any more lucrative places for investments in building housing than London and SE England, in Europe for sure. Yet it's just not happening even close to meeting demand. This has to be an artificial barrier raised between potential investors and the market

Well, if the facts get in the way of your theory, the facts must be changed huh?

It's a complex issues and planning constraints (particularly around the green belt) are certainly a factor restricting supply but it's far from the only one. There is planning permission for more than 250,000 residential units in London, but there are only 20,000 starts a year. Developers are land banking an appreciating asset.

There is also a demand problem. Pre-Brexit, at least, London property was seen as a safety deposit box for foreign investors. Anyone building a new development of any size sells the units off plan around the world. More than half of all prime London property is sold to overseas investors. The buy-to -let market was distorting demand significantly as well, although this should be eased by changes to tax rebates. 

[Valmy]

Ah yeah. There is always the economic issue of rapidly appreciating assets. That can really play havok in a market.

[Josquius]

The average house price in London is £470K, compared to £210K for the UK as a whole.

Don't forget that houses are half the price but salaries are also half the amount :p

Not if you're a teacher, a firefighter, a cop, or a nurse.

True. Part of the problem of cramming the whole economy into London.

[Sheilbh]

Average salary in the City is double the national average. But the average salary in London as a whole is £30k to the national average of £26,500 - so not wildly high.

[grumbler]

[Rents go up, which means returns to building all kinds of housing go up (revenues), as do land prices (costs).  The net impact is incentive to build even more luxury housing.  One of potential market distortions here is that unlike econ 101-land, when more affluent people that move to an area, it can actually increase the demand among affluent people to live in that area instead of satiating it, because of residential sorting effects.

Increasing costs also drive up wages, which makes expensive housing more affordable, etc.  While it is true that residential sorting effects move wealthy people near other wealthy pople, it also then moves them away from where they used to live, and decreased demand in those areas yields lower rates there.

If you restrict building by government fiat then naturally builders will want to use the scarce building permits to meet the demands of those who can pay the most for housing.  But it is the limited building that is causing the shortage, not the unwillingness of builders to meet the demands of the non-ultra-wealthy.

[The Minsky Moment]

Increasing costs also drive up wages

Not necessarily.  If overall demand for workers is not increased - just the location the work is demanded - the effect on wages is unclear, and may depend on ease of movement, slackness of impacted labor market, worker bargaining power, etc.  It is certainly by no means clear that wages will keep place with increases in housing costs.

[crazy canuck]

[Rents go up, which means returns to building all kinds of housing go up (revenues), as do land prices (costs).  The net impact is incentive to build even more luxury housing.  One of potential market distortions here is that unlike econ 101-land, when more affluent people that move to an area, it can actually increase the demand among affluent people to live in that area instead of satiating it, because of residential sorting effects.

Increasing costs also drive up wages, which makes expensive housing more affordable, etc.  While it is true that residential sorting effects move wealthy people near other wealthy pople, it also then moves them away from where they used to live, and decreased demand in those areas yields lower rates there.

If you restrict building by government fiat then naturally builders will want to use the scarce building permits to meet the demands of those who can pay the most for housing.  But it is the limited building that is causing the shortage, not the unwillingness of builders to meet the demands of the non-ultra-wealthy.

Increased cost drives up wages?  Reminds me of the Dilbert cartoon of the 20 something asking for a raise because he had just bought a car he could not afford.  If increased cost of housing drives up wages Vancouver should have experienced substantial wage gains, which have not occurred.    And to your main point, just because there is a high demand for rental does not mean there is not an even higher and more lucrative demand for single unit detached housing for more wealthy purchasers - which is currently the case in Vancouver.

As JR correctly observed, a free market in this kind of market produces a lot of property development well out of the reach of the people who are required to service the elite moving into the high priced properties being developed.  Does that drive up wages?  No.  But it does make for ever greater commutes for the workers who need to move even further out to afford a place to live.

[Valmy]

It reminds me of my wife's observations about Santa Fe. Lots of rich people wanted to live there but the economy was terrible so as a result the property was extremely expensive but the wages were extremely low. If you live and work there I hope you like trailer parks.

[Sheilbh]

Oh good

Leader of expelled leftwing group Militant expects readmission to Labour
Peter Taaffe, whose group was thrown out of party by Neil Kinnock, praises Jeremy Corbyn and rejects entryist claims
Heather Stewart
Wednesday 10 August 2016 13.06 BST Last modified on Wednesday 10 August 2016 13.10 BST

Peter Taaffe, the veteran leader of Militant – the hard left group pushed out of Labour in the 1980s and now renamed the Socialist party – expects to be readmitted to Labour if Jeremy Corbyn wins September's leadership election.

Taaffe, who was a founding editor of the Militant newspaper and has remained active throughout the movement's existence, said he had sounded out Corbyn indirectly, including through Mark Serwotka, the leader of the PCS union, about the possibility of reversing Neil Kinnock's ban on Militant.

He said he had met Corbyn on a number of occasions over the years, and believed the leader would continue to open up Labour "to all strands of socialist and working class opinion" and reject control by a "top-down, centralised elite". . He added: "The lava of this revolution is still hot."

The Socialist party's website reports that members have attended a number of rallies and meetings of Momentum, the grassroots movement set up to back Corbyn. Taaffe said his colleagues had received a warm welcome from some in Labour. "People say: you were a long time gone, welcome back."

He said: "I know Jeremy, he's a good bloke. He's principled. He's on the left."

The Socialist party published an editorial on Tuesday which argued for a split, even if it meant Labour was left with just 20 MPs. "The civil war, now it is out in the open, cannot be simply called off," the editorial said.

"The worst response to Jeremy's re-election would be to attempt to make peace with the Blairites. Many Labour supporters will fear that a split would weaken the Labour Party. In fact the opposite would be the case.

"True a Blairite split away would - at least initially - dramatically decrease the number of Labour MPs in Westminster. But a group of 40, or even 20 or 30, MPs who consistently campaigned against austerity and defended workers in struggle, would do far more to strengthen the fightback against the Tories than 232 'Labour' MPs, a majority who vote for austerity, privatisation and war."

Militant was viewed as an artefact of Labour's troubled history by most in the party until Corbyn's election victory, but Taaffe has remained politically active throughout the decades since being expelled.

He hit back against the deputy leader Tom Watson's claims that "Trotskyist entryists" were infiltrating Labour, saying: "I'm not sure whether Tom Watson was active in the Labour party when we were. He's referring to entryists, but we were not entryists, we were born in the Labour party, and we were expelled because we fought Thatcher in Liverpool and defeated her."

Instead, he said MPs who backed Tony Blair – who won three successive general elections for Labour – were "Tory entryists into the Labour party".

Neil Kinnock's purging of Militant, which culminated in a strongly worded conference speech in 1985 in which he berated the Militant leader of Liverpool council, Derek Hatton, is regarded by many in Labour as a key moment in restoring the party's electability, though it was another 12 years before it won a general election.

But Taaffe and his Socialist party colleagues still believe they should never have been thrown out. "We were the ones who mobilised people against the poll tax and brought down the Thatcher government," Taaffe said. Of Kinnock and his colleagues, he said: "They thought by an administrative measure they could erase social forces from history."

Militant was criticised for operating as a "party within a party", but Taaffe said: "What's the difference between us being affiliated to the Labour party, in an open and democratic way, and the Co-op party being affiliated?"

He said he saw Corbyn's leadership, and the rapid increase in the size of the Labour party, as part of a global phenomenon that could not be halted by opposition among Labour MPs. "Nothing they can do will stop the winds of history as they're developing at the moment."

On Tuesday Corbyn's campaign team condemned Watson for "peddling conspiracy theories" after he warned of "old hands twisting young arms" to shore up support for Corbyn.

Taaffe rejected the idea that Socialist party members were only interested in promulgating political revolution rather than winning parliamentary representation.

He pointed out that Militant had stood candidates in a number of elections, and its successor organisations had continued to do so, adding that the route to progress for the working classes was "not exclusively on the streets, or the industrial struggle – the parliamentary struggle is crucial".

Taaffe's intervention will alarm many in Labour who fear that veterans of struggles to deselect sitting MPs regarded as on the right of the party in the 1980s have been emboldened by Corbyn's decision to shift Labour decisively to the left.

Corbyn's allies have said they want to "circle the wagons" if, as expected, he wins re-election, and tempt back some of the Labour MPs who resigned from his shadow cabinet.

But Taaffe said he should resist the temptation to compromise on his commitment to anti-austerity policies. "The big mistake for Jeremy Corbyn would be to seek peace with these people," he said.

"Jeremy Corbyn has said austerity is a political choice, not a necessity. That's the Ark of the Covenant of the movement at the present time."

[grumbler]

It reminds me of my wife's observations about Santa Fe. Lots of rich people wanted to live there but the economy was terrible so as a result the property was extremely expensive but the wages were extremely low. If you live and work there I hope you like trailer parks.

If costs are high and wages low, people don't want to work there.  Employers will either have to offer more, accept workers who are so bad that they don't have any other choice, or do without.  The argument that living costs don't impact wages can be easily countered by looking at some specifics;  a short orer cook in the US has a median salary of $9 per hour, but in NYC they are offering $15-17 an hour.  I think some people here might even live (or have lived) in NYC and could testify on whether people there really average the national average in wages.