Why, yes, markets work even in housing

There’s a long string of people out there who insist that housing just isn’t like any other market. Financialisation, or assets, or everyone needs a home, or summat. Near always the introduction to reasoning which insists that actually, therefore, politics and the State must be the provider of said housing.

This is not, in fact, true:

Over-optimistic house sellers who end up having to reduce their asking price typically see the property take more than twice as long to sell as those more competitively priced from the outset.

The finding comes in analysis from Zoopla, the property website, which said that while all key measures of activity in the housing market are higher than they were at this point last year, it remains a buyers’ market.

If you try to sell a house at higher than market price then you can’t. You have to then lower the price - which takes the time - and then you can indeed sell the house. That is, house buyers are rational - they’ll not pay more than market price - and that forces sellers to be so too.

We have simple and obvious market effects going on here that is. Which does indeed mean that housing is a market like any other. Supply, demand, prices, we’re in that Econ 101 world.

Which is fortunate because we know how to deal with an Econ 101 world. It’s not exactly a startling proposition that near all of us - other than those currently trying to sell a house - think that the market price of houses is too high. In the Econ 101 world we therefore only need to build more houses, increase the supply of them, and we’ll lower house prices.

So, as we’ve been known to say. Blow up the Town and Country Planning Act 1947 and successors, proper blow up - kablooie. Job done. For if we simply allow people to build more houses then more houses will be built - the price is high, right?

Tim Worstall