An article published in The Independent, Tue 28th Aug suggests that the conventional explanation that it’s a simple case of supply and demand, that there simply aren’t enough houses, might not be the correct one. It also presents the views of Positive Money and Prof Steve Keen on the causes of the staggering increase of house prices.
The campaign group for banking and monetary reform, Positive Money, believe that it is the debt-based nature of our economy which has caused such huge increases.
…it is the banks’ ability to create digital money when they make new loans that has driven the rise in house prices and fuelled the most recent and catastrophic housing bubble. This is because most of the banks’ lending – and hence most newly created money – goes into the housing market in the form of mortgage lending.
Australian Economist, Steve Keen, who is responsible for the studies says in an article entitled ‘House Prices and the Credit Impulse’: “Population dynamics – even immigration dynamics – have nothing to do with house prices. What determines house prices is not the number of babies being born, or immigrants – illegal or otherwise – arriving, but the number of people who have taken out a mortgage, and the dollar value of these mortgages. For changes in house prices, what matters is the acceleration of mortgage debt.”