Why is it that when fuel or food prices go up, the media is quick to react with cries of profiteering or worse? On the other hand, rising house prices are greeted with enthusiasm by just about everyone who isn’t trying to buy a house.House prices are unique in that they defy the normal rules of supply and demand. For every other product in daily life, when prices rise, demand falls. Not with houses. When prices rise, demand increases, all other things remaining equal. The reason for this is that people fear that unless they can get on the property ladder as quickly as possible, prices will continue rising and they will be excluded from owning a home, possibly for ever.
While potential buyers struggle to get into the market, homeowners are the beneficiaries of rising house prices. As prices rise, so they believe does their wealth. This encourages them to borrow and spend more, not only giving work directly to an army of loan and mortgage providers, but when this money spills over into the wider economy, it becomes an important component in the level of consumer spending that has kept the economy buoyant for the past decade.
But at what a cost!
