Taft on house prices

Good blog over at the Irish Left Review on house prices.

Here’s the important and pretty interesting graph:


He takes the data from the the Department of Environment’s Housing Statistics. 

However much of the blog argues that the gap was speculative and this shows that “household debt did not become a crisis because people ‘went nuts’ buying houses”. 

I find this hard to believe. A shift in house prices like this is a transfer of money from homebuyers to homeowners. Now sure, that includes property developers who bought in order to sell and obviously began with owning a lot. But it also involves people who simply owned houses, i.e. ordinary middle aged middle class ‘working people’, to use Uncle Joe‘s phrase.

We can’t explain everything by blaming the ruling class. Sometimes one section of the class gains at the expense of another. In the case of the housing bubble, homeowners gained at the expense of home buyers.

(Obvious objection, home owners still needed to own homes after they sold them. Sure, but lets imagine a couple in their 50s own a three bed family home and sell it for €500,000 to buy a smaller 2 bed for €300,000 now that their kids are grown up. Say the prices have halved so that the 3 bed is now €250,000 and the 2 bed is €150,000. The couple would still be€100,000 better off than they would have been without the bubble.)