The time for change

Despite a faltering economy and the increasing squeeze on living standards, rising house prices remain persistently but not unsurprisingly viewed as a source of wealth and prosperity. This favourable notion of rising house prices has become deep-seated within British culture.

Recent history has seen successive Governments incentivise house price inflation in order to benefit from the powerful but short-term influences of the ensuing “wealth effect”. Equally, there is almost universal cultural conformity to the concept of house price inflation as a desirable and effective means to increasing personal wealth. Consideration has rarely been paid to the increasing debt levels that are necessary to generate house price inflation and the inevitable long-term impact on the cost of living and damage to an economy.

There is today a growing appreciation that house price inflation is not a sustainable basis for an economy, yet there remains a higher expectation and desire for financial gains from residential property at an individual level. Until the fallacy of house price inflation is recognised and more deeply understood, society will be increasingly afflicted by the destructive influences of house price inflation.

The consequences of house price inflation are duly presented to expose such fallacy. The mechanism for house price inflation is explained, dispelling the falsehood that house price inflation arises through a shortage of housing. Finally, the only effective means to controlling house price inflation and eliminating a speculative boom and bust cycle of the residential housing market is presented. Such a policy framework offers the opportunity to create the conditions for residential property to become purely for the provision of accommodation and no longer a source of speculation and profit seeking. The benefits of such a shift in the principle of homeownership would be far-reaching, both economically and socially, providing the foundation for a fairer and more productive society.

The uncomfortable truths of house price inflation

The fundamental flaw to the principle of house price inflation is the simple truth that there is no creation of wealth. Any capital gains that are realised through house price inflation are only achieved at the expense of successive homebuyers. There is therefore no wealth creation, only a transfer of wealth, typically enabled through the creation of new debt.

House price inflation is achieved through the increased mortgage borrowing of successive homebuyers and the increased percentage of disposable income directed towards the costs of housing. As a result of current house price levels, UK householders now hold mortgage debt totalling £1.3 trillion, 80% of GDP. Servicing such debt levels has and will continue to significantly erode living standards. The impact on the economy is equally destructive. The high costs of housing have decreased UK competitiveness through increased living costs and subsequent wage demands, as well as channelling investment away from wealth creating activities. The damage caused to the UK economy from such unproductive allocation of capital and debt accumulation will be long-term. For a majority, the cumulative effect is to significantly reduce standards of living, not meaningfully increase wealth or improve living standards, as is common proposed.

Unsustainable debt levels eventually culminate in increasing mortgage defaults, prompting a reversal of the house price cycle. The short-term economic benefits of the “wealth effect”, namely increased consumer confidence and spending combined with banks’ increasing willingness to provide credit, then ceases. Increasing write-downs result in the rapid contraction of credit, subsequent recession and a continuing spiral of defaults and declining prices, causing widespread damage to an economy. Current interest rates of 0.5% have helped to sustain and potentially extend levels of private debt but the implications for the economy remain largely unchanged; any rise in interest rates will likely precipitate an immediate reversal of the house price cycle. In the interim, existing debt levels will continue to bear heavily on the economy and further increases to mortgage borrowing will potentially lead to unsustainable debt levels at even historic low rates of interest.

It is frequently argued that high debt levels do not matter because it is offset by the high value of housing assets; the total paper value of UK housing assets is often quoted as reassurance. However, in practice and leaving multiple homeownership aside, the equity accumulated in housing cannot be readily realised and particularly not on any large scale. Housing is not an asset that can be arbitrarily disposed of; rather it is required to serve its primary purpose of providing accommodation. It is only through downsizing, relocation or inheritance that equity can be meaningfully released. The withdrawal of equity through borrowing serves to increase indebtedness and does not create wealth. High house prices and mortgage borrowing therefore present a long-term liability and burden on the cost of living.

It remains, however, the wide held perception that through continued house price inflation, homeowners will benefit and the economy will benefit. This theoretical notion of ever-increasing asset values fails to recognise that prices must inevitably reach a level where it becomes no longer feasible to obtain or service increased levels of borrowing.

House price inflation ceases at the point where house prices reach a peak of affordability, whether through price inflation or interest rate rises and subsequent debt servicing costs. Over previous decades, the falling costs of food, clothing and consumer goods have offset the increasing cost of housing. More recently, both partners within a household have typically sought employment to facilitate increased mortgage borrowing. Parents have also come to increasingly help subsidise the growing costs of housing for their children. And most recently, historic low interest rates of 0.5% have enabled a further extension to affordability and borrowing levels. However, with both partners already compelled to work, the costs of food, transport, energy and taxation now in an upward trend, and interest rates at their lowest possible level, further potential for house price inflation will be significantly limited by the constraints of disposable income. The opportunity for significant unearned returns from house price inflation, achieved at the increasing cost to successive homebuyers, has therefore passed. Unless mortgage borrowing levels can be pushed still further through extended mortgage terms or the imposition of shared equity terms, the potential for further house price inflation has largely ended. Both such scenarios starkly illustrate the diminishing returns of house price inflation and the increasing financial burden and subsequent impoverishment imposed upon successive homebuyers.

Whilst the increasing debt levels created by rising house prices are highly detrimental to the health and competitiveness of an economy, in addition to reducing standards of living, the most damaging effect of house price inflation is this widening social inequality. Through house price inflation, prospective homeowners become either unable to purchase a property or else face the prospect of undertaking oppressive debt levels. Conversely, those with the existing benefit of home ownership, or more pertinently multiple homeownership, are enabled to acquire additional wealth through no productive effort. Those with limited financial means or without the support of family wealth so become greatly disadvantaged, which is purported to be counter to the aspirations of both sides of the political divide.

House price inflation also creates a growing generational divide whereby younger generations experience increasing impoverishment and reduced standards of living on account of the costs of housing, in addition to the implications arising from a weakened economy.

Social inequality has been significantly increased through the establishment of buy to let. This has both enabled and encouraged residential property to be purchased for purely investment and profit seeking. Through the basic human necessity for accommodation, those with capital are enabled to acquire further wealth at the expense of those with lesser wealth. In this way, buy to let has provided a highly effective mechanism for transferring wealth from the less well-off to the more well-off.

Any lack of housing supply in the UK comes in significant part from 1.4 million properties becoming financial investment products in the form of buy to let, a demand side increase that also reduces the supply of housing available to purchase as a home. Pent-up demand pressures come principally from those trapped within the private rental sector. Sufficient properties for this group clearly therefore exist but ownership by investor landlords has denied the opportunity for owner-occupation.

A further damaging effect of the rapid growth in house prices has been a ballooning burden on the state through provision of housing benefit. With rapidly rising house prices, many billions of taxpayer money is now directed to private landlords, further promoting property as a form of financial investment. In the extreme, it has been previously possible for a single family to receive a taxpayer funded housing subsidy in excess of £100,000 per year. Even after recently imposed caps on housing benefit, it will remain possible for a family to receive in excess of £20,000 per year in housing subsidy, again taxpayer money that is often directed to private landlords. Subsidies of this magnitude serve to destroy aspiration and impose a highly unproductive burden on taxpayers and the economy.

In addition to the high levels of household debt, widening inequality, burden on state finances and younger generations becoming increasingly disadvantaged, there are now compounding, damaging effects arising from current Government intervention to support the housing market at its inflated levels.

The Government has proven committed to preventing a collapse of the housing market that would lead to potential bank collapses, a discontented electorate and resulting defeat at a general election. To this end, interest rates have been reduced to a historic low in order to reduce mortgage repayment burdens, banks have provided leniency with foreclosures and the taxpayer is being used as guarantor for mortgage lending schemes of last resort. The intended result has been reduced mortgage arrears and repossessions, lower mortgage repayments for homeowners and relative house price stability. This has succeeded in limiting the number of individual insolvencies but has ultimately served to protect debt issuers, financial institutions, from losses and potential collapse. Whilst protecting the financial sector, nothing has been done to address systemic failings and policy has created conditions of inflation and economic malaise.

The subsidy and support for borrowing at the expense of savers, engineered through low interest rates, quantitative easing and cheap institutional funding, is the antithesis of a well-structured economy, which requires saving and consequent investment into wealth creating activities. The effect of inflation is also highly detrimental to the health of an economy, resulting in the erosion of wealth, declining disposable income and decreased long-term confidence. The promotion of further borrowing in misguided efforts to promote further house price inflation is only deepening systemic economic problems and will eventually lead to even greater hardship. Meaningful economic recovery requires the realisation of unsustainable debt and the direction of new investment into productive activity.

The lack of growth and economic malaise now prevalent in western economies results from high levels of private debt, high inflation and lack of investment, all of which have directly resulted from an unprecedented house price boom and subsequent Government policies.

What creates house price inflation

Rising house prices are far from being a purely British phenomenon. Comparable rises in house prices across most western economies have mirrored the market conditions in the UK over recent decades. In reality, the factors that drive house price inflation are the same as in any other free market economy and are not unique to Britain, as is often considered to be the case.

Supply and demand dictates prices in a free market but a prevalent misconception of the housing market arises over the basis of demand and from the inherently inflexible nature of supply. The widely held and often promoted assertion is that house prices are driven only by demand for accommodation and that with population pressures and finite supply, demand must increase, hence prices must increase. So often is this assertion repeated and so strong the perception that much of the public and media remain committed to the notion of a shortage of supply as an explanation for house price inflation, still holding an expectation for a housing market “recovery”. This philosophy receives understandable acceptance through a population growth widely reported to exceed the supply of new housing.

This common explanation for house price inflation has its basis in relating housing to other commodities where large fluctuations in supply have a dominant influence on prices. The supply of housing, however, cannot fluctuate in the manner of typical commodities and supply is simply not able to sufficiently adjust to influence price movements. As evidenced in Spain and Ireland, relative oversupply does nothing to limit house price inflation, the extent of oversupply eventually becoming apparent in the emergence of ghost towns following a collapse of the housing market. Similarly, repeating historical cycles of house price boom and bust exhibit little or no relation to the relative levels of housing stock. A lack or perceived lack of supply does create the conditions for house price inflation but it is not the cause. In contrast, house price inflation arises through demand side influences in the form of speculative based behaviour, being merely enabled by the inherent constraints to supply.

In a debt funded and tax incentivised housing market, house price inflation arises through the inherent incentive to pursue capital gains through speculation on rising prices, whether homeowner, buy to let or other investor. In a rising market the incentive for profit seeking becomes ever stronger, driving prices primarily through speculative behaviour and not a lack of supply. A perceived lack of supply, arising from the inherent constraints to supply in response to price increases, acts to promote such speculative behaviour, further heightening the incentive for profit seeking.

The unprecedented rise in house prices across Europe, trebling over a decade, resulted through such speculative based house price inflation. Such speculation has been driven by the financial and tax incentives, enabled through the availability of easy credit and further encouraged through the emergence of residential property as a purely financial investment vehicle. At its core is the powerful self-interest of personal financial reward.

Through rising house prices and leverage, a property purchased for investment realises very large and disproportionate returns through the increasing asset value. It becomes possible to generate cash returns equivalent to the efforts of many years of paid employment over the course of just months. Returns are 100% tax free with a modest degree of tax planning and property speculation becomes, for a time, vastly more financially rewarding than employment or alternative forms of investment. Being widely promoted through media, such financial incentive is a powerful motivator and serves to create the basis for speculative behaviour.

Owner-occupiers have the same perception of increased wealth through rising prices although in this instance the increased equity remains tied to a property and does not translate to tangible wealth, other than through subsequent downsizing, relocation or inheritance. The withdrawal of equity through borrowing increases indebtedness and does not create wealth. Although there is not the tangible return as for the outright speculator, owner-occupiers do, however, become complicit in the speculative nature of house price inflation, knowingly or otherwise.

A primary driver of house price inflation comes from the principle of the fabled “property ladder”: the perceived incentive to seek a maximum asking price and associated capital gain when selling, combined with the willingness to transfer any such gains, coupled with further borrowing, onto a subsequent property purchase under the guise of increased personal wealth. Such behaviour is speculative in nature but rarely recognised as such on account of cultural familiarity and acceptance. The effect is inflationary and serves to create the self-perpetuating rise in house prices until an eventual collapse from unsustainable debt levels. In contrast, we become only too willing to believe the mantra that house price inflation is caused by lack of supply, as this both justifies the speculative investment and absolves any personal responsibility.

A further powerful driver to financial speculation and investment into residential property has been the establishment of buy-to-let mortgage products. This has increased both the attractiveness and accessibility of residential property for purely financial return. The attraction is a rational one with the potential to accumulate large equity from only a modest initial investment. With rising house prices and leverage the potential returns on investment increase dramatically through capital growth. Homeowners have consequently chosen to rent out their properties when upsizing. And, more pertinently, the incentive and means to create wider property investment “portfolios” has been created.

As a result, residential property is now viewed as the modern day pension scheme of choice, collectively amounting to over 1.4 million buy to let mortgages. Such additional investment-led rather than need based demand has significantly increased demand side pressures whilst reducing the supply of housing available to purchase as a home. Pent-up demand pressures come principally from those trapped within the private rental sector. Sufficient properties for this group clearly therefore exist but ownership by investor landlords has denied the opportunity for owner-occupation.

The supply side pressures of mass immigration are also often overstated and misrepresented in relation to the housing market. Migrants tend to congregate in concentrated, less affluent regions and cities and are often willing to tolerate very poor housing conditions. High occupancy rates and substandard housing such as infamous “beds in sheds” significantly lessen the impact on the availability of housing supply. Regions that have not witnessed significant immigration have experienced similar rates of house price inflation, independent to the pressures of immigration.

Governments have coveted the effect of rising house prices and so are inclined to promote rather than moderate speculation. The home-owning majority, with a perceived increase in wealth, will tend to spend more, thereby stimulating growth of a consumer driven economy. In tandem, banks’ increasing willingness to supply credit helps to encourage this “wealth effect” and to fund consumer spending. The increasing private debt required to support both consumer spending and the rising costs of housing is a long-term concern and therefore of no consequence to the short-term horizon of politics. Conversely, the compulsion for both partners within a household to seek employment to finance mortgage borrowing is an attractive consequence, ensuring an increased tax base. Stamp duty also offers a useful additional revenue source, with rising house prices and increased sale volumes leading to increased tax revenues.

Of course, MPs typically fall into the (multiple) homeowner bracket, so those who have influenced housing policy are also likely to be those who have a strong vested interest in rising house prices.

It is Government, whose purpose it is to regulate markets for the benefit of society at large, that has failed, encouraging speculative based house price inflation motivated by short-term interests. Individuals cannot be reasonably criticised for pursuing self-interests and seeking to prosper from the opportunities that are made available. Effective governance, however, requires policy placing wider benefit before self-interest.

Reforming the housing market

Huge damage has been done to the economy and the majority will now suffer the consequences of an unprecedented housing boom, whilst only a minority will benefit from unearned, speculative based returns through house price inflation.

It is the speculative nature of buying and selling houses and specifically the inherent incentive to seek capital gain that drives house price inflation. Until the expectation and incentive for capital gains through house price inflation can be addressed, we will continue to be forever afflicted by an increasingly damaging boom and bust cycle in the housing market.

The long-term strategy must be to reform the housing market to eliminate the influences of financial speculation on residential housing, thereby moderating prices to sustainable levels for the sole purpose of providing housing. Money invested into residential property for financial return is of no social value and becomes a powerful driver of social inequality.

There is a potential solution to reform the housing market that although intensely politically challenging, can bring price stability, as well as redressing the imbalances caused by house price inflation.

The single policy that would serve to transform the housing market from a speculative based one, with its associated boom and bust cycle, to a free but effective provider of housing, would be the following:

Capital gains tax to be applied to all residential property sales based on the inflation-adjusted rise in value since purchase, regardless of being a main or secondary home.

It is the inherent attraction of unearned return through increasing asset value that drives financial speculation. Increasing asset values encourage leverage (borrowing in the expectation of greater returns), which in turn promotes further increases in asset values until an eventual bust and market correction. A boom and bust cycle in the housing market is extremely damaging to the economy and for society at large. A punitively high rate of capital gains tax would remove incentive for financial speculation and prevent the growth of a speculative bubble.

Gains made from house price inflation are achieved through no productive effort and are counter to the principals of a well-functioning free market economy, also serving to drive social inequality. It is therefore morally and socially responsible to prevent the mechanism for such activity.

Existing capital gains tax on second homes is regularly avoided, as proficiently demonstrated by MPs. A capital gains tax on all properties will effectively prevent all such tax avoidance.

Taken to its natural conclusion, a 100% index-linked capital gains tax on residential property would remove any incentive for financial speculation on rising house prices. Indeed an incentive for speculative capital gain would remain with any lower threshold and so would likely be ineffectual. With a 100% threshold there immediately becomes no incentive to seek a sale price higher than an inflation-adjusted purchase price, thereby moderating prices and eliminating speculation. It would therefore not lead to higher prices, as some first perceive. Over the longer term, house prices would revert to a sustainable level, tending to increase at or around the rate of inflation, thereby moderating and stabilizing a housing market to the greater benefit of society. It would be argued that this removes incentive to invest in a home. However, the incentive to undertake cosmetic improvement would be the incentive to improve one’s own living accommodation, not a means to generating profit, and the cost of undertaking structural improvements or repairs can be factored into the capital gains liability, as for second homes currently.

The consequences of a 100% capital gains tax on residential property would be the following:

Immediately there becomes no incentive to seek a sale price greater than an inflation-adjusted purchase price, hence moderating prices

Residential property becomes solely for the provision of accommodation and no longer a source of speculation

House prices come to reflect a true value as accommodation with a genuine dependence on supply and not one governed by speculative market forces

Unproductive, speculative investment is directed away from residential property to productive and socially beneficial forms of investment

The financial disparity created between those who purchase at a particular point in time and those who do not is removed

Principally, a much coveted end to the cycle of house price boom and bust, establishing long-term stability and the conditions for a well-functioning economy and fairer society

Principal objection would come from those naturally wishing to protect their self-interests. Whilst the implied financial disadvantage for this particular population set could be reasonably justified for the reasons already discussed, the sudden change in policy could be considered as too immediate, allowing for no transition to a new principle of homeownership. The political hurdle would also certainly prove too great. Two alternative approaches could therefore be used to mitigate the process of transition.

The first such approach would be to include a one-time relief to the application of capital gains tax for purchases preceding the date of introduction. Such relief could remain as a one-time measure or preferably be phased out over a specified timeframe of perhaps 5-10 years in order to end preferential treatment and establish the level playing field achieved through full implementation. Such an incentive would act to encourage downsizing or relocation and so promote beneficial movement in the housing market.

The implied incentive for investors to sell would result in downward pressure on prices but would be a consequence of the shift in investment away from residential property into more productive forms of investment. Of further benefit, the availability of housing to purchase as a home would increase. In principle, this downward pressure on prices would not prompt banking collapses since sales would not be driven by defaults on loans, as occurs in the collapse of a debt-fuelled, speculative bubble. Any rise in interest rates would, however, still likely prompt a reversal of the house price cycle but would not be a consequence of the proposed policy framework.

The second approach would be to delay introduction until a sharp decline in house prices from a bust phase of the current cycle. By introducing the proposed policies after a sharp decline in prices, no individual would become financially disadvantaged and so any grounds for objection would become purely ideological.

Prices have fallen from their peak in real terms across some regions but the current excessive debt burden will result in a bust phase of further rapidly declining prices unless interest rates can continue to be maintained at historic lows. In this instance prices will likely experience a slower and more protracted decline in real terms as debt levels and inflation continue to stagnate the economy. Government intervention through additional lending schemes may promote a further rise in prices but, through further increasing excessive debt levels, a subsequent bust phase becomes more inevitable.

Another common argument against such a measure is made on the grounds of impaired mobility. Lack of mobility implications arise solely as a consequence of house price inflation, however. A 100% capital gains tax serves to create a level playing field where every individual, homeowner or otherwise, faces the same impediment to house purchase resulting from house price inflation. The disparity between those who purchase a property at a particular point in time and those who do not is eliminated. Over the longer-term, such a measure would lead to house price stability and consequently greatly lessen the hindrance to mobility for all. A one-time relief for prior purchases would give exemption to those affected by an immediate introduction and therefore no individual would face impaired mobility as a consequence of the policy, either presently or in the future.

A more relevant restriction to mobility arises through stamp duty. Stamp duty amounts to a tax on relocation and is not an effective form of taxation of either income or wealth. Taxation inherently discourages the associated activity and so a hindrance to relocation does not constitute a sensible form of taxation. Stamp duty should therefore be eliminated and the shortfall of revenue recovered through either income or council tax.

Other more straightforward but important complimentary policies are as follows:

Mortgages to be restricted to a maximum of three times single income or four and a half times joint income, with a maximum 90% loan to value ratio.

Unregulated lending promotes over-borrowing. Over-borrowing is detrimental to individuals, encourages the growth of asset prices and creates significant risk for wider society.

No taxable deductions for interest payments on borrowings for buy-to-let mortgages and loan to value ratios limited to 50% or less.

Use of residential property as a purely financial investment vehicle raises asset prices, reduces the availability of housing stock to purchase as a home and is a powerful driver of social inequality; the financial incentives for such form of investment must be far greater moderated to curtail the growth of buy to let investments and to instead encourage more beneficial forms of investment.

Overseas funded residential property purchases should incur capital gains tax and face punitive stamp duty charges.

Foreign investment into residential property currently incurs no UK capital gains tax, providing strong incentives for speculative investment. Such investment is of little social value and fuels the growth of asset prices.

Banks to be regulated to maintain higher capital requirements against mortgage lending.

In the under-regulated banking environment, banks are permitted to build up dangerously high levels of leverage from limited capital. As banks generate profit through the interest on borrowings, the incentive to lend, coupled with the further incentive to encourage a speculative bubble and so encourage further demand for borrowing, serve to incentivise reckless lending practices. Such activity has now been shown to be without risk and the constraints of moral hazard, with taxpayers taking all accountability and responsibility for losses. This creates huge risk and liability for society and provides the plentiful credit that fuels the creation of speculative housing bubbles.

A significantly higher capital requirement would reduce the incentive for reckless lending, control the supply of credit and protect the taxpayer from bailouts of the banking sector, in addition to limiting the growth of damaging asset bubbles.

Concluding Remarks

The proposed policy framework would serve to regulate the housing market and prevent residential property being subject to the mechanisms of financial speculation, instead encouraging a more stable, socially beneficial property market.

It may initially be challenging to introduce such policies, as it would be readily portrayed by opponents to be attacking the wealth of individuals and of being anti-capitalist. However, the cost of a home would still reflect its relative desirability and the aspirational nature of property ownership would remain unaffected. By introduction of a one-time relief for prior house purchases, or by introduction following a decline in prices, no individual would become financially disadvantaged. Importantly, no new tax burden would be created, as there would become no incentive to seek a capital gain and hence incur tax. A 100% threshold acts as a means to preventing a detrimental activity and does not become an intended source of tax revenue.

The intended consequence of such measures would be to promote home ownership for purely the provision of accommodation and to remove any incentive for financial speculation and profit seeking. A 100% capital gains tax on above inflation increases in value will remove the mechanism for speculative based house price inflation that is so damaging to both the economy and society. Over the longer-term it would deliver an end to the boom and bust cycle in the housing market, as so often called for.

It is no coincidence that a country such as Germany, which has shunned speculation on residential property, benefits from a strong economy and high living standards. Money that would have been consumed by the cost of property has instead enabled saving and consequent investment into German industry. Similarly, wage demands have remained lower on account of the lower costs of living, boosting global competitiveness. Through not engaging in speculation on residential property, Germany has thrived and remains a leading manufacturing and export-led economy despite the competition of low cost wages in Asia.

In summary, it is short sighted and short-termist to encourage financial speculation and investment in residential property, as has been and continues to be pursued to increasingly reckless ends. It would be to the greater benefit of society to promote a stable housing market that provides affordable and attainable living accommodation. Investment that would be channelled into a housing market with adverse social consequences would instead be directed to more socially advantageous investment in productive activities that encourage economic growth and employment. The reform of the housing market would be of wide-reaching social benefit, both in terms of individual opportunity and well-being and the long-term prosperity of the wider economy.

How to make a difference

Whether you agree or disagree with the proposed policies, hopefully you will agree that the current situation is unsustainable and has caused huge damage to the economy and society in general. The foundation to a well-functioning society cannot be to encourage speculation on a fundamental basic commodity such as housing, accruing ever-larger debts out of the necessity for accommodation and to require working longer and harder to sustain such debt, or for the provision of ever-larger benefits for those without income. This increasing debt burden is detrimental to individuals, damages competitiveness and serves to benefit only financial institutions and secure tax revenues through compulsion to work. The premise of wealth creation and pension provision through house price inflation is entirely unsustainable. Buying and selling each other increasingly expensive property does not create wealth. Any financial gains that are achieved through house price inflation are only acquired at the cost of successive homebuyers. There is no creation of wealth, only a transfer of wealth, typically enabled through the creation of new debt.

The key barrier to effecting change is challenging established opinion. In today’s climate of anger towards tax avoidance and disproportionate reward, the principle of tax free and unearned income achieved through house price inflation remains accepted and indeed encouraged. Society has become conditioned to believe that rising house prices are a legitimate source of wealth and many will remain deeply opposed to the view that house price inflation is actually so divisive and damaging. The reality is that high house prices collectively lead to high indebtedness, reduced competitiveness and increased inequality, not creating wealth or an improved standard of living for the majority of owner-occupiers or non-homeowners alike. That is detrimental for individuals, detrimental for society and detrimental for an economy. Once individuals come to better recognise this fallacy of house price inflation then perhaps the notion of house buying and ownership can finally be reformed and one of the biggest single shortcomings of a free-market, capitalist economy can be righted.

From a Renegade Correspondent – Neil