The Halifax has just released its monthly figures for January that show prices have increased by 0.6% extending the recovery that started in April.

Many people across the country are scratching their heads in disbelief wondering how on earth house prices have continued to rise when the country is in such economic desperation.

Many explanations are floating around for the miraculous recovery we are seeing take root in our headlines informing us that the crash is over. Some would argue that the economy isn’t doing so bad after all and that there are many signs of green shoots, others will tell you that there is a tolling bell of doom ringing that will herald the collapse of the this great nation we call The United Comedown.

Well what are the facts?

The facts are simple, house prices are now less affordable than they have been for many years leaving first time buyers who would like to buy a small one or two bedroom house (not average house) with less than £40,000 in the bank virtually exempt from the market.

The Banks have no intention of turning the tap back on to sustain the housing market with prices at their current levels.

Overseas investors and large conglomerates of business men are snapping up what they perceive to be bargains as are those rich enough to put forward a substantial deposit but the national obsession with housing speculation continues leaving large swathes of the population wondering when the halcyon days of Location, Location, Location will return when everyone was investing in a sure thing and property was on its eternal upward trend.

But does this alone explain why housing is continuing to rise?

No.

Only prime properties within different price bands are selling, the house that needed that extra £15k spent on it for renovation is not even getting viewings but the pristinely finished house is.

The lack of supply argument is rubbish, there are for sale signs up and down the country and not all areas are seeing rises, in fact the localisation of the house price increases are pointing towards a new North/South divide.

We need to understand that one section of the economy namely the financial institutions have been in part subsidised by the tax payers and the recipients of the wealth generated within that industry (and the industries supported i.e. catering services to the city) are localised to London and desirable areas for retirees (from the city) all over the country so the map of house price increases is like patchwork quilt of wealth distribution flowing from London.

If there is such a flow of wealth extending from London this does reinforce Boris Johnson’s defense of the The City but it seems as though the wealth is being distributed in all the wrong places with a negative impact on the communities that have found house prices in their beloved village are no longer affordable because of the influx of city folk.

This is the source of much resentment that needn’t be there if you were wealthy thanks to a lifetimes work in London would you do the same?

All that is required is some sort of taxation put into place helping to remove the incentive of profiteering from property investment and second homes.

Tags: Boris Johnson, House Prices, housing market, Land Value Tax, Mortgages, News, Property Market, Property Prices, tax

This entry was posted on Friday, February 5th, 2010 at 10:17 am and is filed under House Price Bubble. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.