I don’t claim to be an economist

Stagnation.

Assuming first time buyers and "social housing people" don't have large budgets, builders would not make profits from building, so would stop.

You could, then, try and subsidise the builders, but how long can you justify that to the much-quoted taxpayers?

Conservatory wrote: »

Chaos is a ladder

How is chaos a ladder?

NOUN

Complete disorder and confusion.

Conservatory wrote: »

I think there is enough first time buyers trying to buy at the moment but house prices are inflated by the lack of supply. This would cause a correction in prices it could go back to normal in a few years when they actually start building houses again instead of fudging the numbers.

Constricting the potential number of buyers, and casting doubt on the prices that builders may be able to sell at once the buildings are finished is unlikely to increase stock, though. So the problem of there not being enough houses would only be aggravated.

I don't claim to be an economist either, but the last financial crisis a decade ago got me very interested in the topic, like an amateur air crash investigator after a plane goes down. The fundamental problem is that housing has become financialised - meaning that people with lots of money have turned away from other forms of investment (businesses, stock markets, commodities) towards housing, because that's what makes them the most money. Not just directly, in property itself, but also in the debt incurred on property (mortgages).

Not everyone is aware of the fact that when you take out a mortgage, it's a liability to you (because you owe that money), but to the bank that mortgage is an asset. It's one that is basically guaranteed to make the bank a profit as long as the holder keeps making the payments. The bank doesn't sit on those assets: they are sold at a profit by the bank to investment banks, who package them up as "mortgage-backed securities" and allow investors - people with money - to invest in them.

Which is great as long as the money keeps flowing in, but if the mortgage-holder can't make the payments, and payment insurance can't keep up, then the "asset" can lose its value. That's what happened a decade ago with the subprime mortgage crisis, where "subprime" refers to the borrowers: people who should never have been sold mortgages in the first place. So why were they sold, then? Because the mortgage brokers made a profit and weren't on the hook, and then neither were the issuing banks, which sold the mortgages off to investment banks like the now-defunct Lehman Brothers, which went tits-up when the money stopped rolling in. Oh, and just to add insult to injury: what happens to house prices when more buyers have access to easy credit? Boom. Bust.

If your eyes are glazing over at this point, that's financialisation of property: your home is making more money for other people who already have money, and are just looking for a good "return on their investment". To me it's starting to boil down to a simple choice: in a mixed "semi-socialist" economy like we have here in Ireland (as in most of Europe and the UK), what is the role of government in the housing market? Should they stay out of it almost entirely, as they do at the moment, or should it be more like health care, where they provide a basic service at taxpayer expense? I think that's a good analogy, since the current situation with housing in Ireland is really not good for the financial and social health of the country as a whole.

kneemos wrote: »

Makes as much sense as most economists.