6 november 2010, reality is almost always wrong

Not the doctor, but the place to live, of which there is a chronic shortage in the uk, as house building has declined dramatically over the last 2 years, with no signs of improvement. Apart from land that people want to build on not being made available, this is largely because the norm here is home ownership. However, as hefty deposits are now needed for first time buyers, and declining prices have hit those who already own, the market is weak and indeed getting weaker. Public interventions have kept things afloat until now, but with all spending now slashed, that is grinding to a total halt. It may be a while until it percolates through that the fundamentals have changed and that the end of the access (now gone) to cheap money (going soon, as high inflation and interest rates mean expensive money) that fuelled ever-increasing house prices means that owning your own house no longer makes such great sense. Like germany and so many other continental markets, renting is more and more likely to rise, and not just for students. This view is strengthened by the fact that even with the last years' decline, uk house prices remain vastly overpriced: they need to fall a further 25% to hit their long-term average. What is needed to unblock the system is investor confidence in a financial model that securitises long-term rental incomes, so enabling a mass of building in the first place, and enabling more to be built from revenue and profits. But this isn't going to happen before it takes hold that the change from own to rent isn't a blip but a trend.