Saturday, 29 September 2012

PositiveMoney's generic article: Why Are House Prices So High

Why Are House Prices So High? (Press Release)

In the ten years up to the start of the financial crisis, house prices rose by over 200%. Why? A common belief is that there are too many people, too much immigration, and too few houses to go around.
Our new 2 minute video addresses the root causes of the housing crisis. It explains that house prices aren’t high because there’s “too many people and too few houses”. And it answers the crucial question: Why are house prices really so high?

(click to enlarge)
Why are house prices so high? In the ten years up to the start of the financial crisis, house prices rose by over 200%. (*1) Why? A common belief is that there are too many people, too much immigration, and too few houses to go around. But this is a myth. In fact, during this time for every 4 new people, we built 3 new homes. (*2) But at the same time, mortgage lending grew by over 370%! So, where did we find all this money to buy houses? When you take out a mortgage, the money doesn't actually come from somebody else's savings. No. It's actually just created, electronically, by your bank typing numbers into a computer. And it's those newly-created numbers, or newly-created money, that you can use to pay for your new house. Since every mortgage works this way, all the crazy lending before the crisis created hundreds of billions of brand new money. And this new money flooded into property... Pushing houses prices up so high. Everyone pays more for a place to live, which means that, after paying the mortgage or the rent, there's less money to pay the bills, And less money to spend with businesses and shops in your town. So high house prices don't make us richer - they make us poorer. Well actually, not all of us -- high prices and big mortgages mean bigger profits for the banks. And with an effective license to print money, this guarantees they'll lend too much. So if we want to keep houses affordable for ordinary people, we have to look to the banks, and together take away their power to create money, for good.

You can find more details on this here:
http://www.positivemoney.org.uk/consequences/house-prices/
and
http://www.positivemoney.org.uk/consequences/house-prices/in-depth/

Our aim is to raise awareness and start conversations about the causes of the housing crisis and get us thinking more critically and creatively about the solutions.

Positive Money is a not-for-profit research and campaign group. They work to raise awareness of the connections between our current monetary and banking system and the serious social, economic and ecological problems that face the UK and the world today. In particular they focus on the role of banks in creating the nation’s money supply through the accounting process they use when they make loans – an aspect of banking which is poorly understood. Positive Money believe these fundamental flaws are at the root of – or a major contributor to – problems of poverty, excessive debt, growing inequality and environmental degradation. For more information, please visit: http://www.positivemoney.org.uk/

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