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Thursday, 19 August 2021


A good start, but then fluffs it!

Brian O'Neill on August 19, 2021, 8:01 am on Slugger blog

House prices in Northern Ireland are nearly 10% higher than they were last year. The average price for a house in Northern Ireland is £153,449.

While we are not seeing the insane prices we had during the last boom there is a huge demand for houses. Rental prices have also increased.

Rising property prices give homeowners the delusion that they are richer. They think they are sitting on a rising asset. But (he says)

 you can only realise the growth of the asset if you sell up and move out of the country.

>>NO! Trading-down esp. on retiring is also a great way of putting real money in the bank

 If you sell your house the house you want to buy will also have risen, making you no better off.

The key issue is Northern Ireland is a low wage economy and we need more homes for lower earners. If you are in retail or the service sector you could be paying 2/3s of your salary in rent or housing costs. This sucks money out of the economy because it will be money they can’t spend on other things like shops, going out and other services.

We need to do two things. (he says)

The first obvious one is to build more houses.


>>NO! Look south where this was proven to be an utter delusion. (OK, in the long-term, but fixing the market is the first thing that must be done)


The Housing Executive and the various housing associations need to get the finger out and just build more new developments. Money has never been cheaper to borrow. We should be looking at new techniques like offsite construction. Fast House up in Limavady are churning out houses in their factory. I would like to talk to someone in Fast House so if you are reading this give me a shout.


The second thing we need to do (he says) is put more controls on the rental market.


>>Probably. The landlord friendly regime, product of free-marketeers needs to be reined in. But vote-gathering Rent Control can be just as dangerous.


We need to stop middle-class people hoovering up houses to rent or pricing out locals in coastal areas. House prices in the North Coast are up 17% in the past year. I get it, you love your weekend breaks to Portrush but it is selfish to have a holiday home lying empty 11 months of the year when local families can’t get a home. Get an Airbnb instead.

If you pardon me while I rant for a minute. Dear middle-class people: stop buying houses to rent. Have people learned nothing from the last crash? 15 years ago every solicitor and accountant watched too much Homes Under the Hammer and thought they were buy-to-let superstars. Many were nearly destroyed in the property crash. But it seems people learned nothing and buy-to-let is coming back into fashion. Being a landlord is a pain in the hole and nowhere near as lucrative as you might imagine. I have no shortage of stories of friends who lost hundreds of thousands in the last crash. Many are still trying to pay off the loans. Stick your money in an Index Fund, you will get better returns with zero stress.

Houses are for people to live in. We need to stop thinking of them as piggy banks for the middle class.

>>Dim-witted article. Gets the point—Prices are Too High, but doesn’t really understand why. Then makes a bunch of useless suggestions.


Wednesday, 11 August 2021



Democratization of home ownership meant that housing no longer was owned primarily by

absentee owners extracting rent, but by owner-occupants. As home ownership spread, new buyers

came to support the rentier drives to block land taxation—not realizing that rent that was not

taxed would be paid to the banks as interest to absorb the rent-of-location hitherto paid to absentee


Real estate has risen in price as a result of debt leveraging. The process makes investors,

speculators, and their bankers wealthy but raises the cost of housing (and commercial property)

for new buyers, who are obliged to take on more debt in order to obtain secure housing. That cost

is also passed on to renters, and employers ultimately are obliged to pay their labor force enough

to pay these financialized housing costs.

From North America to Europe, debt deflation has become the distinguishing feature of

today’s economies, imposing austerity as debt service absorbs a rising share of personal and

corporate income and thereby leaves less to spend on goods and services. The economy’s indebted

90 percent find themselves obliged to pay more and more interest and financial fees. The corporate

sector, and now also the state and local government sector, likewise are obliged to pay a

rising share of their revenue to creditors.

Investors are willing to pay most of their rental income as interest to the banking sector

because they hope to sell their property at some point for a capital gain. Modern finance capitalism

focuses on total returns, defined as current income plus asset-price gains, above all for land

and real estate (figure 1). Inasmuch as a home or other property is worth however much banks

will lend against it, wealth is created primarily by financial means by banks lending a rising proportion

of the value of assets pledged as collateral.

The fact that asset-price gains are largely debt-financed explains why economic growth is

slowing in the United States and Europe, even as stock market and real estate prices are inflated

on credit. The result is a debt-leveraged economy.

Changes in the value of the economy’s land from year to year far exceeds the change in GDP.

Wealth is obtained primarily by asset-price (capital) gains in the valuation of land and real estate,

stocks, bonds, and creditor loans (virtual wealth), not so much by saving income (wages, profits,

and rents). The magnitude of these asset-price gains tends to dwarf profits, rental income, and

wages. The tendency has been to imagine that rising prices for real estate, stocks, and bonds has been

making homeowners richer. But this price rise is fueled by bank credit. A home or other property

is worth however much a bank will lend against it—and banks have lent a larger and larger proportion

of the home’s value since 1945. For US real estate as a whole, debt has come to exceed equity for more than a decade now. Rising real estate prices have made banks and speculators rich, but have left homeowners and commercial real estate debt strapped.

The economy as a whole has suffered. Debt-fueled housing costs in the United States are so

high that if all Americans were given their physical consumer goods for free—their food, clothing

and so forth—they still could not compete with workers in China or most other countries.

That factor is a major reason why the US economy is deindustrializing. Thus, this policy of creating

wealth by financialization undercuts the logic of industrial capitalism.

Can be found at