Houses Not Special in UK Too

I asked here whether real property is still a special category of property and my answer tended towards saying that in the US, it appears that those days are long gone. The same fixation on the part of the public and their governments seems to have afflicted the United Kingdom where taxation policy tended to tilt in favour of home ownership. In spite of the fact that the slump in the UK appears to have been corrected and home values have not fallen precipitously, Larry Elliot of the Guardian argues convincingly that house prices will fall for a while yet.

Indicators of the underlying difficulties in real property markets are seen in the fact that first time buyers are unable to afford property and there is a big generational difference in the ability to acquire home. iIn essence, the ownership of homes favours the elderly citizens together with wealthier individuals. In a sense, that house prices in the UK and the US have faced difficulties and are bound to remain low for a while is a good case study for students of economics. One wishes that the laity understands that the problem was the belief pushed by interested lenders and brokers that home ownership is special.

Houses Not Special Property Anymore

I am not a resident of the American continent but I think that the financial crises has clarified a point that beautifully illustrates the value of first principles in economics and how markets function. While there is understandable argument about the causes and the trajectory of the causative factors, what is clear to me is that the big myth and fallacy that housing as a category of property is not subject to downward price fluctuation has been shown to be untrue. David Streitfield of the NYT files a report whose basic argument is that the magic of house ownership as a sure and superior form of property is being painfully revised.

It states that the belief was reinforced by the fact that for more than a whole generation, real returns on housing were sufficiently high. This allowed many US citizens to take mortgages from which they would build household wealth due to price appreciation. Dean Baker of the CEPR buttresses the argument with the estimate that it will take at least two decades to recover the US$ 6 trillion in wealth lost since 2005. In other words, there is a surfeit of houses and making money out of homes is highly improbable.  Demand and supply do rule but those with an interest in selling houses and whose income comes from selling houses will obviously try to convince people that housing is a special category of property.