The Inside Edge
In his Morning Line article today, property market commentator for Citywire, Tony Bonsinore, says:
‘…relying on rising house prices as a way of stimulating economic recovery is robbing the young to pay the old – and lying about it in the process’.
Not to be accused of mis-quoting our man Tony, he is paraphrasing a paper by the National Institute of Economic and Social Research (NIESR) published today, which voices a challenging new perspective on the issue of the housing market.
The paper questions whether rising house prices are in the interests of the economy or whether rising house prices make the older ‘landed’ generations richer whilst the ‘landless’ younger generation struggles harder to meet a rising welfare state bill and forgoe acquiring property of their own due to inaccessible prices.
The paper questions (in social and economic terms) the received wisdom expounded by the government, banks, leading economists and the mass media that house price rises are good and house price falls (and crashes) are bad.
However the government, which has tried to bolster house prices through stamp duty holidays, quantitative easing programs and pushing banks to lend more money and go easy on mortgage defaulters, has a vested interest in rising house prices – not only to appease house-owning voters – but as a strategy to rescue the economy through increased consumption encouraged by a recovery in house prices.
The paper warns that those that subscribe to this strategy as opposed to an economic recovery founded on a budget deficit are ‘living a dangerous and remarkable delusion’.