It's A New Dawn, But Same Day

Another month and another indicator that the British economy is slowly lurching out of recession. The Halifax have announced that house prices in Britain have risen by 1.2% in October and which represents a slight fall of 1.5% compared to a year ago, which is the smallest decline in the year on year statistic since this credit crunch began.

This, as a simplistic statistic, can appear to be encouraging news for the economy, demand increasing which implies that more people have renewed faith in their economic futures. Also the access to credit is becoming more freely available, so good news all around...

Not quite. Beneath the encouraging facade of these statistic, lays an uncomfortable truth; the rise in house prices might indicate economic recovery, but they almost definitely indicate a huge shortage of new houses. This short fall distorts the simple concepts of supply and demand, in which demand is relativity constant and supply is so small that drives up the price to the extent that it matches demand.

Until recently, people in the UK needed relatively easy access to credit in order to purchase a modest property, this can be seen in the incredibly dangerous mortgage deals that allowed people to borrow at six times their own salary. The result was this only masked the housing short fall, but did not attempt to solve the underlying issues.

Furthermore, the low interest rates that mortgage holders are currently enjoying are further masking this most serious of problems. The Government has lacked a coherent housing policy since 1997, arguments between government and councils are common place, but it is the government that should display effective leadership on the matter.

If the government does not address the serious issues in their housing policy Britain is doomed to repeat the simple mistakes of the past...