Monday 28 April 2014

Ricardo's Law Of Rent (part 94)

From Lloyds Banking Group:

Homeowners in local authorities with the largest falls in the unemployment rate have seen the value of their property rise by almost £136,000 over a decade, according to new research by Lloyds Bank.

The average house price in the ten local areas that recorded the largest falls in the unemployment rate in the decade to March 2014 rose by 68%, or £198,709, to £334,404. The unemployment rate in these areas fell by 1.3% during the period...

At the other end of the spectrum the top ten areas with the lowest house price performance and a higher unemployment rate are generally concentrated in Northern Ireland and outside southern England...

The top ten areas with the lowest price performance have an unemployment rate that is on average 2.2% higher now than in March 2004.


Well, duh.

It's not just that people with good jobs have more money to spend and some of that money goes on higher rent/house prices; it is also that people are prepared to pay more to live in areas with higher employment rates - the extra income justifies paying the extra rent (or you could say: landlords will charge an entry fee nearly as high as the extra wages which people can earn if they live in that area).

7 comments:

Lola said...

It never ceases to amaze me that 'findings' like these do not ever prompt them to the next level of thinking about what they have 'found'. It is a 'no brainer' to say, 'Hang on, who is really profiting from all this?'. And, 'Hang on. So all those extra earnings are going in rent?'. And then, 'If all those extra earnings are going into rent, which is consumption, they cannot be going into production or savings and investment. Surely that can't be a good thing?'

Bayard said...

L, what do you expect after a hundred years of doublethink?

Mark Wadsworth said...

L, I can't understand it either.

Ricardo's Law of Rent is so easily observable, not even the Homeys deny it, in fact they celebrate it, nobody draws your obvious conclusions.

B, it's not a hundred years, it's more like a thousand years. Landowners have always shrouded themselves in mystique, that's why the large landowners have several names/titles and ask to be addressed as "Sir" or "My Lord".

Lola said...

MW. Humph. I have met quite a few of the Great and the Good, and when you meet them, they aren't. I test very high on insubordination...

Mark Wadsworth said...

L you don't have to be great or good to yap on about "Location location location".

That is an observable thing, there's no dispute that LLL is the driver of land prices (duh), it's just that I and my ilk refer to it as "community generated land values".

Similarly they will say that high rents and house prices in London aren't a problem because wages are higher here so people can still afford them. That is also true, and is the same facts but with a different logic.

Bayard said...

Well, it's a hundred years since Winston Churchill got keen on LVT and the Proto-homeownerists realised that they had to make sure that the idea that any tax on land was a Bad Thing was part of the nations accepted beliefs in pretty short order. By that time, the amount of tax raised from land was falling nicely and the amount of tax raised from elsewhere was growing nicely also. The last thing that they wanted was any reversal of the trend.

Mark Wadsworth said...

B, yes that's all true. The Liberals messed up somewhere a hundred years ago (like not simply executing the entire House of Lords) and the Homeys have been winning ever since.