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Sunday, 26 January 2025

Fact 2. 'House' prices are not rising.

It's ONLY the Value of the PLOT 

-the land the house is built on -- 

that is rising, not the Value of the Building. 


Here’s how Josh explains this: 

Rising house prices in the UK and other high-income economies have mainly

been driven by rising land values, with the cost of housing structures tracking

consumer price inflation. 

Land underlying dwellings in the UK has increased in nominal value almost eight-

fold since 1995, from £0.7 trillion in 1995 to £5.4 trillion. 

This is equivalent to an increase from 82% to 252% of GDP.


From an economic theory perspective, capital gains and rental income from

property are normally considered as economic rents – income derived from

control over a scarce asset (land) needed for production – rather than normal

profit derived from productive investment in a competitive market. 


Land has unique properties differentiating it from other commodities, 

including being inherently scarce, fixed and irreproducible, 

which means its owners are able to extract economic rents 

if permitted to do so. Increased financial flows into unproductive assets 

like land and property increase such rents and can be viewed as 

an inefficient allocation of capital, with negative consequences for economic

growth and wealth inequality.”


JR-C gets it! The conclusion that stopping land-price rises is the best fix. 

(Although ‘only’ holding building costs shows a tech failure by the industry)

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