By continually boosting new house building the politicians may just continue to keep the property market in the doldrums. If new house builders are boosted, any slight increase in demand for property above the current equilibrium will initially be sated by the new houses, resulting in less growth in the major sector – ie. the existing housing stock.
It is growth in the existing housing stock sector which will stimulate demand and create spin-off economic benefits in house decorations, upgrades, electrical and plumbing improvements, solicitors, surveyors and tax (stamp duty) revenue. All of which are related industries whose fates are tied to the success, or failure, of the incumbent housing stock. Demand and rising housing prices in this existing sector will remove negative equity traps and free up funds for a multiplier effect inducing stimulus. To read the full article click here.