This is why house prices will just carry on rising – unless we act!


Once again, the media are scaring homeowners with the prospect of falling house prices this spring.

I was expecting house prices to fall similarly back 35 years or so, but they never did – or not for very long. Why? Because it made sense that, when people at the bottom of the housing ladder could no longer clamber aboard, then it seemed obvious that the prices would begin to fall.

So why didn’t they? Primarily because most opinion-formers and politicians have a very naive view about why house prices actually rise.

Yes, it is classic inflation – too much money chasing too few goods – but they have always emphasised the goods when they should have been lookinh at the too much money end of the equation.

We should actually have been looking at how much money was going into property in the UK.

This is not a new idea.

Until 1979, the government used a system called the Corset – which balanced the amount of money available for mortgages with the house price index, keeping it steady. But once the end of exchange controls took place that year, the Corset couldn’t survive – at least in that form (for what happened to the Corset, see my book Broke).

But the tragedy for the middle classes now – when very few of us can afford to buy in the neighbourhoods we grew up in – and why our children will struggle to afford anywhere to live, really became clear last weekend, in the Guardian reported on all those assets held by offshore trusts in tax havens.

The real issue is that the Chinese Investment Corporation now owns more than 250 properties across the UK. Out of a total estimated at £970bn, UK land registry records suggest that they have spent at least £580m on property here.

Here is the rub, because – if China buys up buildings in London, which drags up prices across the country – they are just a tip of the iceberg of  money that pours in from the Far East into UK property.

We have all heard stories about whole new estates or blocks of luxury flats that agents have simply reserved for far eastern investors.

There is the fundamental problem – and the reason why outrageous prices will carry on rising some time. Because there is now way we can ever build enough homes to keep prices down – while we try to keep up with the demand for homes, in London in particular, from abroad.

The main worry is what it will do to the UK money supply if we were to suffer a catastrophic fall in prices. Because about 60 per cent of the money we use started life as mortgages.

There may be a solution.

Charge foreigners extra for keeping their homes here empty, then discouraging people from taking out foreign mortgages by making sure that there is no governmental protection for them if their financial provider goes belly up.

Then we might just be able to bring back something like the Corset – so that we can, ever so gently, bring the damaging housing bubble back to earth.

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Radix is the radical centre think tank. We welcome all contributions which promote system change, challenge established notions and re-imagine our societies. The views expressed here are those of the individual contributor and not necessarily shared by Radix.


  1. Conall Boyle says

    Brilliant! I said much the same in my recent book “Stop Houseprices Rising: The essential first fix for the broken housing market.” (BitesizedBooks, 2022). I, too, am old enough to remember the Corset!

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