Comment by nomaD_ | Hacker News Reader

Comment by nomaD_ | Hacker News Reader

I am in Indian immigrant living in the UK for past 5 years. The housing system here feels extremely stupid to me. They basically resell houses 100+ years old at 5% higher value every year. It's kinda like gold or bitcoin, except those assets are actually very limited in number. But housing is simply artificially limited due to policies.

Total UK housing stock is worth 10T GBP vs 2.2T GBP GDP output. Don't think any other country comes even close in terms of skewed reliance on housing as a driver of wealth. I can't imagine the reduction in net worth of citizens (65% are owners) when house prices crash 20% due to higher interest rates. That would be 2T of the 10T value - almost the same as GDP.

Anecdotally, every British person I know has a common long term goal - save enough money for a 5-10% deposit on a mortgage. The incentives here are all wrong. You build wealth by investing in a house & taking 90% loan to value mortgages instead of actually working harder. Work is just a means to save enough for deposit & afford a mortgage premiums and maybe 1-2 holidays a year.

People complain UK is stagnating. Companies don't want to IPO in London. I can tell why - banks don't want to lend to SMEs. 50% of their lending is actually housing mortgages. Same with people - they would overwhelmingly invest in a house rather than own company shares. Housing is the root cause of malaise in the economy. Take away the incentives to own a house by building more homes, increasing mortgage rates and eliminating government policies helping people to buy & this country would just become much better

Great comment.

You've described the issue at the upper-end of the income spectrum well. I think you're correct that excess income in this country tends to largely be funnelled into real estate rather than building businesses, but equally on the lower income spectrum (where individuals don't have the income to afford their own homes) their income gets redistributed to the wealthy via high rents (and I'd argue taxation too, but that's another topic).

That said, I'm not sure housing is the root cause of our economic problems – although it's certainly part of it. I think the primary issue is government underinvestment and that we just generally don't have very good incentives to build or work here. This has probably been the case for the last 20 or so years and now with these latest economic challenges the consequences are really starting to show.

On the wealthier end of the economy I'd argue culturally entrepreneurs and investors are far more risk adverse here. Technology and startups are viewed with more scepticism and less optimism and for this reason people tend do less innovative things. This is compounded by the fact our government has done very little to encourage innovation. So for this reason startups here tend to just apply tech to existing business models. Eg, "we're a bank but with a tech focus", "we're an insurance startup but with a tech focus", "we're an energy company but with a tech focus". This is literally the height of innovation in the UK. We rarely build anything truly new or interesting in the same way I'd argue Scandinavian countries do. Then on top of this you have the government crippling innovation via excessive taxation and regulation – although this is more of a general European issue.

On the lower-income side of the equation I have no idea why people work anymore. If you know what you're doing you can earn around £20,000 (tax free) on benefits in the UK. Additionally the government will give you a house (and often a car) so in total you'll generally have a far higher living standard on benefits than getting a working class job paying you £22,000. Whenever I say this I always have middle class people say I'm exaggerating or somehow slandering working class people as being lazy – and to be clear I'm not. I'm from a working class background and the majority of my family are on benefits because it just makes sense.

Out of curiosity how would someone earn £20k of benefits while also getting a house? That seems outlandish to me.

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