UK Government to artificially inflate house prices

BBC news is reporting about Gordon Brown and David Milliband’s plans to artificially inflate house prices. Since the banks tightened up on credit in what is known as the ‘credit crunch’ resulting from the banks apparent distrust of one another, less first-time-buyers have been making the plunge into the housing market. The lower rate may also have something to do with the collapse of a house price bubble, it was easy to justify taking a large loan to buy a house when everyone seemed to believe the house price would continue to rise at 10% per year. The government is to launch a system were they can make loans of up to 1/3 for new houses, the system called HomeBuy Direct, is to be run together with “large-scale” property firms, presumably the house building companies whose financial reports showed the pressure they are under.

Such a move won’t actually help first-time-buyers since what ever credit is available to them will just be used to increase house prices, as we just saw in the previous 10 years of increasing credit availability.

I don’t understand, what happened to free-market economics, by intervening the government is taxing us more to distort the market, and then risking our tax money in the housing market. Only good news for… intervention.

Global house price crash at Guardian dot co dot UK.


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