House prices in Langham

Nothing could be more illustrative of the stratospheric rise in Langham house prices than a brief history of the St Mary’s estate, presented here in the form of newspaper cuttings.

 

1972

(The hutment being the barracks for RAF Langham. Frederick Budd Ryder was the owner of Langham Hall Farm.)

13.8.76

12.11.76

(St Andrew’s Drift trends eastwards, away from Langham St Mary’s and deeper into Langham St Andrew’s.)

14.3.77

1983

1983

A house in Binham Road that when first sold (in 1977) might have gone for no more than £20,000 is now being offered for sale at £595,000 – a nearly thirtyfold increase in 46 years.

According to the Bank of England’s inflation calculator, £20,000 in 1977 had the same general purchasing power as £111,840 today. If sold for the asking price, the house in Binham Road will have outstripped general inflation by a factor of 5.32.

The causes of the increase are various. They include:

Demographics. Mass immigration was actively encouraged by the Blair government and has continued ever since. The official population of the UK now stands at nearly 68 million; in 1970 it was no more than 56 million. Unofficial estimates suggest the true figure may be as high as 80 million – and that figure was quoted in 2007. Given the volume of both legal and illegal net immigration since then, no one knows what the true number is today.

House prices in north Norfolk have been increased by an influx of wealthy retirees, many from London and the south of England, where prices are of course even higher than they are here. A one-bedroomed flat in Chelsea is currently on offer for £595,000, the same price as that three-bedroomed detached house in Binham Road. Even in outer London and into the adjoining shires, a relatively modest family home can cost well in excess of £1 million. Someone moving here from the south is liable to offer the full asking price, or even exceed it, to secure the property they have fallen in love with.

Remote working has also enabled city-dwellers to move to the countryside. The improved road links between here and London, besides the regular rail service from Sheringham to Norwich and thence Liverpool Street, make feasible an occasional visit to a London head office; and Norwich Airport is not so very far away.

Fractional reserve banking. This is the process whereby money is created by issuing debt. Except for banknotes and coins, which are produced by the government, the money in circulation has been and continues to be created by the banks. The fraction of deposits to be held in reserve is typically mandated by regulators at 10%, but can go as low as 2% or, in some cases, zero. Thus if one deposits £100 in one’s bank account, the bank is typically authorised to lend £90 of it right away to someone else. When the £90 finds it way back into that or another bank, a further £81 can be loaned. It is usually rather more complicated than that, but you can see that fractional reserve banking is inherently inflationary.

Rather than issuing its own money, which it could, the government borrows. Public spending usually exceeds the tax-take, creating a budget deficit known as the Public Sector Net Cash Requirement. Each annual PSNCR adds to the National Debt, which is the total quantity of money borrowed by the British Government at any one time through the issue of securities, whether by the Treasury or other government agencies. About two-thirds of these securities are held by insurance companies and pension funds. Interest is due every six months and is reflected in the taxes we pay.

Taxation increases the cost of goods and services to which it is applied, and because the tax burden has been steadily increasing this also causes inflation. The National Debt now surpasses £1 trillion. Factoring in all liabilities including state and public sector pensions, the real national debt is closer to £4.8 trillion, some £78,000 for every person in the UK, assuming the official figure for the population. At present the National Debt is growing by over £5,000 a second.

Regulation of the rental market. Top-down interference in any market usually leads to dysfunction, of which inflation is a common symptom. However, when it comes to dealing with the minority of landlords who prove to be unscrupulous, regulation is absolutely necessary. A consequence is that not a few would-be landlords decline to enter the market at all, limiting the supply and thereby keeping the cost of renting higher than it would otherwise have been. Recent changes in the rules concerning allowable expenses for buy-to-let landlords have driven many of them to sell up, which has (a) caused rents to rise and (b) increased the number of houses for sale and therefore had a dampening effect on prices.

High rents make home-ownership more desirable, putting pressure on house-prices, cancelling out (b), so the overall effect of government regulation of the rental market is an increase in the cost of renting, which in turn puts further pressure on house-prices.

Planning constraints. Unless the whole country is to be built over and its heritage and livability trashed, there must be constraints on the number of new houses, as here in Langham. Lanpro’s proposed scheme would irreversibly change the character of the village and have a deleterious effect on the quality of life here. Constraints in any market lead to scarcity and hence higher prices.

Artificially low interest rates. This is the big one, and a prime cause of the steep rise in the cost of housing in Britain since 2008. We need not look in too much detail at the 2008 financial crash, though we should remember that, rather than allowing the culprits to fail, the Brown government bailed them out with taxpayers’ money, thereby increasing the public debt.

Since the foundation of the Bank of England in 1694, the base rate has averaged about 5%. After the 2008 crash the BoE and other Western central banks, such as the European Central Bank and the Federal Reserve in Washington, instituted a policy of suppressing base rates. The idea was to stimulate the economies left moribund by the banking crisis. The result was cheap money, issued to some extent at the expense of savers, who for the past fifteen years have seen the value of their savings depleted by rates that fell, and indeed still fall, far short of the level of inflation.

This abundance of cheap money led directly to accelerated inflation in the housing market, where buyers must outbid each other. The result, now that interest rates are returning to the norm, is a mounting disaster for the unfortunates who had no choice but to borrow exorbitant sums if they wanted to get on the property ladder. The alternative, renting, merely sees money going out of the window, never to return.

When these people’s current mortgage deals expire, they will have to renew. Already there are stories of households facing an unaffordable trebling of their mortgage payments.

This is the result of failure to address the structural weaknesses revealed in 2008. Policymakers have simply kicked the can down the road while the problems have been mounting, and it would appear that things are coming to a head. It will be impossible to evict so many defaulting mortgagees; and even if they are evicted, where are they expected to live?

Implications for the Lanpro proposal

Cheap money has been good for developers. A return to higher rates will obviously make financing the scheme more expensive. The price of building materials has also skyrocketed, thanks in part to the backfiring of sanctions against Russia. There is an acute shortage of skilled tradesmen, exacerbated by Brexit and the return to eastern Europe of so many bricklayers, electricians, and the rest.

House prices are beginning to fall, and if there are wholesale repossessions they will fall more steeply still, making any new housing development less profitable. The NNDC is likely to insist that a third or more of the houses will be classified as affordable homes, which require funding ultimately or directly from the government. Whether the funds available will be as plentiful as they have been hitherto is debatable, again given the rise in interest rates.

In all, it would appear that events in the wider world are militating against the success of the scheme, were it to be approved, which is in itself highly unlikely, given that the 2019 application, positing a larger number of dwellings, was so roundly rejected at the pre-planning stage.

Many thanks to Edward Allen for the newspaper cuttings – what may seem to many of us like something to line the budgie’s cage with is, in the right hands, a valuable historical resource.