Expensive houses or really expensive houses?

Houses are getting more and more expensive in the UK.

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Expensive houses in London are getting more expensive at a fast rate

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Expensive houses in inner London are getting more expensive at an even faster rate.

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The gap between the cost of the more expensive houses and averagely priced houses is getting bigger and bigger in London, while it is quite stable in other parts of the country.

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Similarly, the gap between how much an average home costs and how much a cheaper home costs is getting bigger and bigger in London, but not in other regions.

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What’s going on here? It’s partly a matter of not enough homes being built. If there were more homes being built in London then house prices would not go up so quickly.

However, is there something else at work here? Larry Summers has argued that the rich countries are experiencing ‘secular stagnation‘. Economies with low interest rates and low growth rates don’t offer investors many places to put there money. It’s perhaps to be expected that in these circumstances rich people from around the world invest their money in property in inner London.

Housing wealth

There has been lots of discussion recently about how much more the ‘1%’ earn than everyone else. There has been less attention paid to how much more they own.

In fact, wealth (what people own) is more unequally distributed than income.

Wealth vs income distribution

 

This chart gives you an idea of just how unequally distributed wealth is in the UK.

Wealth distribution

Wealth includes things like pensions and stocks. If we just concentrate on housing wealth (Total housing wealth in the UK stands at something like £3,375 billion) we see a similar picture. Here is how housing wealth is distributed.

Distribution of housing wealth

 

House prices have increased significantly, even adjusting for inflation, since the 1970s as this chart shows.

House prices adjusting for inflation

 

However, this has not uniformly benefited all homeowners.

Rises in house prices for mean and median

 

But has hugely benefitted those who own expensive houses.

Rise in value of prime accomidation

 

Many of whom are not born in the UK.

Country of origin of prime accommodation buyers