To The Economist
02 June 2003
Your survey of property is excellent in its analysis of demand but skims over the issue of supply. Even this is an improvement on your publication “The World in 2003” which analysed the property market without reference to supply.
Supply is not solely, or even principally, a matter of land shortage in urban areas but mostly a product of government intervention: planning consents. As a result of ever-tighter planning controls the UK is building fewer houses than at any time since the 1920s. The government’s solution to this problem is to talk about building more houses but to tighten planning controls.
Planning consent is the most expensive element of property. In some areas it accounts for more than 90% of the price. It is a state monopoly product and the government is reducing supply. In these circumstances the idea of a property bubble seems extraordinarily unlikely.
If your otherwise excellent newspaper continues to analyse property prices without reference to a protectionist measure which drastically limits new supply, you may have to change its name.
Copyright (c) Quentin Langley 02 June 2003