Scarcity is the building block of most economic systems. The less of a product you have available, the more expensive it becomes.
We’ve been able to watch in action with all of the best commodities – oil, food, housing. The principle of supply and demand is fundamental, and it isn’t likely to disappear anytime soon.
How many of you bought a house 20 or so years ago – either as a home or as an investment property – and have been sitting back and watching is value double or triple every 10 years?
And rents have been increasing steadily too. Simply because demand is outstripping supply. As the government, newspapers, and other media pundits never grow tired of telling us, the UK is in the middle of a housing crisis.
More sensationalist papers tell us that migrants are entirely to blame. The root cause of the excessive demand only really matters if it goes away, because without the constant need for more and more housing, prices will stagnate or even drop.
And unfortunately, there’s a fairly good chance that it will.
If you were paying attention in November, you will have noticed Chancellor Philip Hammond making housing the one of the centrepieces of his budget. And in October, Theresa May pledged an extra £2 billion per year to furnish the country with 25,000 new council homes.
After taking care of the 4,100 rough sleepers in the UK, that leaves 20,000 new homes to be let out at a low rate to tenants who are currently renting privately. Your tenants maybe.
It’s not a huge number – it’s only around 0.5% of the total number of rented properties in the UK. But it’s increasing the supply, and eating away at demand.
And remember, these are only the Conservative proposals. It’s not altogether impossible that we’ll have a Labour government this time next year.
For private landlords, it could be a testing time as Jeremy Corbyn’s government plans to build at least 100,000 new homes, and force landowners to sell potential building plots for next to nothing, before undertaking, “the biggest council house building programme in at least 30 years.”
Even more supply, even less demand. The scarcity which has helped drive up prices and rents could end up a fond and distant memory.
We shouldn’t even need to point this out, as a glut of private rental properties in the south east pushed rents down by 2.3% last year.
In these places, it’s not even council houses with their guaranteed tenancies and low rents which are sounding the claggy chimes of doom for private landlords.
But it could well be here.
Image credit: Department for Business, Innovation and Skills