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House Prices: Why are they so high?
Poziom:
Temat: Gospodarka
Why are house prices so high?
In the ten years up to the start of the financial
crisis, house prices rose by over 200%.
A common belief is that there are too many
people, too much immigration,
and too few houses to go around.
This is a myth.
In fact, during this time for every 4 new
people, we built 3 new homes.
But at the same time, mortgage lending grew
by over 370%!
So, where did we find all this money to buy
houses?
When you take out a mortgage, the money doesn’t
actually come from someone else’s savings.
No. It’s actually just created, electronically,
by your bank typing numbers into a computer.
And it’s those newly-created numbers, or
newly-created money, that you can use to pay
for your new house.
Since every mortgage works this way, all the
crazy lending before the crisis created hundreds
of billions of brand new money.
And this new money flooded into property...
...pushing houses prices up so high.
Everyone pays more for a place to live,
which means that,
after paying the mortgage or the rent,
there’s less money to pay the bills,
and less money to spend with businesses and
shops in your town.
So high house prices don’t make us richer
- they make us poorer.
Well actually, not all of us –
high prices and big mortgages mean
bigger profits for the banks.
And with an effective license to print money,
this guarantees they’ll lend too much.
So if we want to keep houses affordable for
ordinary people, we have to look to the banks,
and together take away their power to create
money, for good.
