Wednesday, 7 March 2018

Theresa May Can't See The Wood Huts For The Tree-Houses

Young people without family wealth are "right to be angry" at not being able to buy a home, says Theresa May. She is right, but alas, she neglects to tell the whole story - the part where successive governments, including hers, have played a huge part in this problem is the real reason prospective home owners should be angry.

Suppose you actually want to help the buyers of a specific product like housing - the last thing you should do is help make it a sellers' market. A sellers’ market is an economic situation that hands advantages to sellers over buyers, and this is the society to which young people have been accustomed.

House owners hope the housing market will be a sellers’ market when the time comes to sell their house, and house buyers hope the housing market will be a buyers' market when they are ready to get on the property ladder.

Governments who advocate strict planning regulations in effect support the state-mandated creation of a sellers' market, while at the same time they kick many prospective buyers' feet away from the first rung of the property ladder.

Basic economics should inform our politicians that if demand is high but supply is restricted, then prices will rise, making housing unaffordable for more people. So long as politicians do not interfere with prices, they will tend to adjust so that the quantities demanded and quantities supplied are more or less in equilibrium.

Theresa May is not stupid - she is expressing phoney outrage while keeping quiet about the fact that bargaining inequalities in the housing marketplace are creating a shortage. Currently the amount of housing demanded by buyers is greater than the amount supplied by providers; and prices will fall only when restrictions are relaxed so that the amount demanded by buyers is equal to or less than the amount supplied by sellers - when there is more of a buyers' market and less of a sellers' market.

The only thing that might provide a little medicine to people's frustration is the laughter they can express when they see the recent appearance of Green Party leader Caroline Lucas on Channel4 News, stating what a bad job the government is doing on the affordability of housing problem. The Green Party no less - which is rather like the Chief Executive of McDonald's appearing on television saying what a bad job Subway is doing on tackling teenage obesity.