House prices: Who’s to blame?
From Deputy Geoff Southern.
I WRITE to highlight the lack of substance in the responses from the Council of Ministers to the rampant house price inflation we are now witnessing.
There can be no doubt that house price rises of over 20% are unsustainable. There is equally no doubt in my mind that these rises are the result of this government’s misguided policies, and the collective inability of ministers to deliver what they promise. Between them, the Ministers of Economic Development, Housing and Planning, along with the Chief Minister, have combined to produce the catastrophic situation we find today.
Sky-high house prices are the product of supply and demand, and the simple fact is that ministers have simply not delivered a sufficient supply of three-bedroom family houses to match demand. Senator Le Main has been the minister or president of Housing for the past eight years, eight years in which he has let the States rental stock sink into a woeful state of disrepair. His answer to the lack of supply of houses is to sell off rental stock, which he then bungles, losing £1.5m in the process.
The point is that not one additional house is added to the market. Instead social rental housing is reduced. Doh! Where do those renters then live? But anyway it’s not Terry’s fault. According to him, he cannot build a single house. He can only do what the Planning Minister lets him do. The current Planning Minister, Senator Cohen, says it’s not his fault either; his hands are tied by the old Island Plan. In the meantime he comes up with Jersey Homebuy, a scheme by which we get something for nothing.
Houses for first-time buyers at 35% discount! If it sounds too good to be true, that’s probably because it is. Where are these houses to come from? Some kind developers will sell off new-build social rental housing at below-market values to not-for-profit buyers who will pass them on to first-time buyers.
Once again, social renters (those in real need) lose out, and not a single extra house gets built. Oh, and at some time in the future, like in 50 years, when the house is finally sold on, 35% of the value will be recycled into more housing. I would like to describe this nutty scheme as a short-term fix, but unfortunately it doesn’t fix anything.
What about the previous Planning Minister, Senator Ozouf? What part does he play in this sad farrago? He is now the Economic Development Minister and is gung-ho for economic growth. He has exceeded his wildest dreams. He was aiming for two per cent growth, and we got seven per cent or more. But with that runaway economic growth, we also get runaway immigration. In 2006, he delivered 700 immigrants, including 200 J-cats. All indications are that the numbers will be even larger in 2007. These are permanent, high-earning J-cats, many in the finance sector, with the right to buy. They are undoubtedly fuelling the demand for three-bedroom houses and further driving up prices.
The Chief Minister declares that he is content that house prices are simply a reflection of a buoyant economy and that it shows that Islanders are earning more. Well some, the haves, might be doing very well, but most people are not. With house prices reaching 14 times average earnings, young people and most workers outside the finance sector are being priced out of their Island. With his Imagine Jersey 2035 opinion manipulation exercise, Senator Walker prepares the way for even higher immigration.
In the meantime, what do ministers do? Apart from encouraging more unsustainable business growth, the Economic Development Minister, in the words of one of my colleagues, aspires to be the first person to make a gold banana fly. Well it did, briefly, until the website crashed.
Our Chief Minister, meanwhile, devotes his time to such vital issues as whether we should go for euro-time and to commissioning a new anthem. What a legacy he will leave when he retires, bloodied but unbowed, from the political arena in October. Let us hope that those who can afford to stay in Jersey have sufficient energy and will start cleaning up the mess he and his ministers will have left behind.
I think we already know that there is an agenda to make house prices as expensive as possible purely because of the vested interest of the Ministers involved in this.
But the money must be coming from somewhere in order to fuel these house prices anyway. The only way we will see a change in the momentum of house prices is to tax it. Bring in a style of CGT and remove all tax relief on mortgages like the UK.
I cannot think of any other way, because if things carry on as they are, wage inflation will force us into a precarious situation of competitiveness.
I know Geoff Southern is using his letter to promote the JDA, but instead of finger pointing, maybe he should now work on a letter of problem solving?
