zlacker

In London it really is down to supply and demand. The UK economy is highly centralized in London and the South East, population in the metropolitan area is now at record levels having shot past the pre-War peak in the past few years. (The population of the South East never really declined but had shifted to the commuter belt.) For many careers you really have to move there if you want a good job.

Meanwhile many fewer homes are being built. The largest drop has been in building by local authorities, which used to account for almost half of all new builds before Thatcher brought things to a halt in in the 1980's by selling off social housing and preventing councils from investing the proceeds. (See: http://www.lrb.co.uk/v36/n01/james-meek/where-will-we-live)

As real wages have stagnated for most people, multiple administrations have propped up demand through ever inflating house prices. People feel richer when their home goes up in value but this wealth is illusory, nothing new has been created, only a generational shift in capital as young people are forced to fork out ever more of their income in rent.

>>lauren+(OP)
Planning permission is hard to get and greatly enhances land value. It is not supply and demand. Credit bubble with govt underwriting prices.

>>branch+t9
While credit conditions are a factor in property prices they don't help explain the huge increase in London rents over the past 10 years which have gone up far faster than incomes.

The private rental market in the UK is all short term lets, after the first year the landlord is free to adjust the rent. With council housing now largely gone it's an unanchored free market. Restricting supply (e.g. through difficulty obtaining planning permission) while demand increases does of course drive up rents.

Property prices are a function of interest rates and rents. Credit conditions come into play here in determining how much a prospective home owner or buy-to-let investor can borrow and pay for a property.

>>lauren+ve
Rents in the UK are utterly outstripped by price rises. This is because rents are set by wages whereas prices are set by available credit (and outside money if like the UK you allow full money laundering through land).

I agree loose credit is the primary cause. However that wasn't what my post was about, I was challenging the assertion that planning permission is easily gained. It's not.

Restrictive planning is vital for creating artificial scarcity. To ramp prices with loose credit you have to push supply below demand to create an auction scenario.

>>branch+dO
I never made the assertion that planning permission was easily gained.