The question on everybody’s lips seems to be – Why are British homes so very expensive? London although definitely very pricey is not the only place in the country that this phenomenon is taking place but it is nationwide. Prices are costing an ever-growing multiple of the average yearly salary more so in the capital but also in many other cities and rural areas across the UK. City Quays has seen the new research shows house prices in England have grown with more speed than in the majority of other European countries since 1973.

Here at City Quays we ask why this is occurring; well it is the same as ever, supply and demand. Little supply and availability and huge demand from overseas, due to the amazing market stability and investment opportunities and an ever increasing population, creates a market that is a sellers dream. People all vying for the same properties means sellers can ask what they want for their properties or sit back while the offers come pouring in. But why is happening? We can see two possible reasons.

One we believe to be regulatory developers are finding it difficult to build new homes to meet demand due to such tight and restrictive rules and laws making it very difficult to build them. Serve planning regulations and constrictive legislation all mean prices rise and supply is not met. Where as in other countries with more lacks rules and regulations developers are free to build and supply goes up and demand is met bringing prises to a more reasonable level. Also scarcity of land or appropriate land is the secondary factor which effects the ability of new homes to be built. Uneven topography and shear lack of availability of land plays its part.

Christian A. L. Hilber from the London School of Economics and Wouter Vermeulen of the CPB Netherlands Bureau for Economic Policy Analysis have produced a dispassionate analysis of these problem to look at which of these factors has greatest effect and if these were not a problem how would this effect the Market, this will be published in the Economic Journal.

After adjusting for consumer price inflation, from 1974 to 2008, they have found that house prices in England would have risen by about 100 percentage points fewer, in the absence of regulatory constraints to house building. In simpler terms, they would have gone up from £79,000 to £147,000, instead of what they have actually done which is to have risen to £226,000. Another way of putting it is prices would have been 35% cheaper!!

This clearly indicates that our strict policies, laws, and regulations surrounding the ability of developers to build new homes in England has had direct effect on the prices and are in fact the reason why we are having to pay so much.

The most regulated region in England is the south-east and if this had been as liberally regulated as the North East, this being the least regulated over the past 40 years, house prices in the south-east would still have been roughly 25% lower.

The authors of these findings aren’t necessarily supporting deregulation: they are purely trying to calculate the effect of constraints, using complicated econometric techniques and a wealth of detailed data which has been collected over many years.

Then we can look at the physical restrictions and if in a hypothetical world where they could be magicked away what would the effect of this be? Well prices would be 15% lower today than they would otherwise have been. Again the commonly these constraints are more greatly felt in highly urbanised areas such as London in the south-east, for obvious reasons. Those being there is not as much space available in city centres and lots in the countryside. In simple terms some parts of the country are easier to build on than others.

It is clear that prices would have risen even had we still been governed by the liberal planning framework of the 1930s, but by much less. The impact of regulations on prices is relatively recent; they started to have an effect by the 1970s and have played a much greater role in the past 20 years.

This is all fairly plain to see. As mentioned above Prices are determined by supply and demand. Also people need and want to live where there are jobs, meaning that there is a huge amount of demand in London and its commuter belt. The government is saying that it wants to move economic activity to the North, and announced its Northern Powerhouse plan this month, but these sorts of artificial activity-shifting schemes have a history of failing. House building finally seems to be creeping up, partly as a result of the Coalition’s reforms in this area of law, but not by enough to make a huge difference. The unfortunate truth is that house prices will continue to rise and this will continue until the next crash and that is that.

Spaces map

Here is a great map of land use in London which shows how the space is used in a very interesting way. Found on: http://www.greaterlondonnationalpark.org.uk/an-alternative-vision-of-london/