House Prices "Heavily Undervalued" says Times article

the_flying_pig

chucky wrote: »

Because they probably won't be able to make enough profit or margin on the housing market if they built houses there amongst many other business decisions..

to me that sounds like an abysmal market failure - companies who need constantly increasing prices to stay in business, with even a relatively small fall being enough to make them almost completely shut up shop, take their ball home with them, whatever.

imagine if British Airways had done the same when the low cost carriers came along in the 90s, leading to widespread falls in air fares, or if the low cost carriers hadn't bothered to enter, becuase to do so at lower prices than the norm wouldn't make any sense.

sounds to me like a strong case for not pretending that this a [cough] 'free market' can deliver what's needed here.

in other words, to get council house building back to what it was in the day.

chucky

the_flying_pig wrote: »

to me that sounds like an abysmal market failure - companies who need constantly increasing prices to stay in business, with even a relatively small fall being enough to make them almost completely shut up shop, take their ball home with them, whatever.

imagine if British Airways had done the same when the low cost carriers came along in the 90s, leading to widespread falls in air fares, or if the low cost carriers hadn't bothered to enter, becuase to do so at lower prices than the norm wouldn't make any sense.

sounds to me like a strong case for not pretending that this a [cough] 'free market' can deliver what's needed here.

in other words, to get council house building back to what it was in the day.

You can't compare an industry like the airline business that has very high costs for having assets on the ground compared to a building firm that owns land at low cost whilst it doesn't depreciate in value.

Also if you want to penalise them so that they build, you should be in favour of some sort of law that only allows fixed square footage per household depending on numbers. If they exceed this, they should pay extra for living in a large house or wanting a large garden.

the_flying_pig

chucky wrote: »

You can't compare an industry like the airline business that has very high costs for having assets on the ground compared to a building firm that owns land at low cost whilst it doesn't depreciate in value...

that's my point - they're fundamentally different. the 'free market' seems very good at providing one, & very bad at providing the other.

it's just a pathetic system, where subsidee, ZIRP, or squillions of funny money is supposedly needed at the first sign of trouble...

especially if you're going to let inflation rip at 10 or even 20% per year during 'boom' times, it's unthinkable that demand won't get ahead of itself sometimes, & that there won't be corrections.

root & branch reform is what's needed. the current group of builders aren't necessarily 'villains' of the piece, they're just profit maximising companies responding to a set of incentives that happen not to be in the public interest.

chucky

the_flying_pig wrote: »

that's my point - they're fundamentally different. the 'free market' seems very good at providing one, & very bad at providing the other.

it's just a pathetic system, where subsidee, ZIRP, or squillions of funny money is supposedly needed at the first sign of trouble...

especially if you're going to let inflation rip at 10 or even 20% per year during 'boom' times, it's unthinkable that demand won't get ahead of itself sometimes, & that there won't be corrections.

root & branch reform is what's needed. the current group of builders aren't necessarily 'villains' of the piece, they're just profit maximising companies responding to a set of incentives that happen not to be in the public interest.

I agree but... I don't think it's a 'pathetic system' though as it's what was needed/decided on so it's something that has to be lived with and we have to get on with.

wotsthat

shortchanged wrote: »

g) or just sitting on them to help push prices up by stifling supply.

I think there might be an issue with builders sitting on plots with permission but not then developing them.

I very much doubt that it's a) very significant or b) a real attempt to stifle supply. Given the riches that some people think it's possible to earn by building houses the common sense approach would be to build houses rather than hold land.

It would be good to see not an undeveloped parcel of land 10 years after planning because that proves nothing but some data on what the average time from planning to first completion is. Exceptions tend to be used to prove rules in these arguments.

Maybe consider a complaint to the office of fair trading?

OffGridLiving

I don't know whether it's the same with plots for large scale developers, but with self-builders, once you have bought a plot with planning permission you can't tarry for too long because if your planning permission expires you have to re-apply and there is no guarantee that you'll get it.

A neighbour of mine had permission to build a double garage but let the permissions lapse. A few years later and he resubmitted his plans only to have them rejected. He now has an expensive parking space. Still, the space abutts part of my garden and so I might make him an offer for it when/if his appeal is unsuccessful. Every cloud has a silver lining.

shortchanged_2

I do actually believe that the large building companies are acting like a cartel.
There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means.

chucky

shortchanged wrote: »

I do actually believe that the large building companies are acting like a cartel.
There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means.

What's the governments excuse then? They're allowed to build houses.

wotsthat

shortchanged wrote: »

I do actually believe that the large building companies are acting like a cartel.
There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means.

If you suspect that a cartel is operating, telephone the OFT's cartel hotline 0800 085 1664 or email cartelshotline@oft.gsi.gov.uk. If you leave a message, a member of the cartels investigation branch will contact you to discuss your concerns.

http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/cartels/complain#.UgTmV5LbPSg

Please let us know how you get on.

shortchanged_2

chucky wrote: »

What's the governments excuse then? They're allowed to build houses.

Have you seen the make up of the cabinet. http://www.dailymail.co.uk/news/election/article-1280554/The-coalition-millionaires-23-29-member-new-cabinet-worth-1m--Lib-Dems-just-wealthy-Tories.html

Granted its a little old but it's mostly the same old cronies.

And the conservatives have never had much time for social housing so they are never going to facilitate mass social house building schemes.

Plus the big building companies have the ear of one or two MP's.