The Adam Smith Institute's Head of Policy, Ben Southwood, argues that there is reason to doubt UK housing will be involved in a future financial crisis.
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"On one level, it is impossible to predict which sectors will be connected to future financial crises. But I think there is one reason to doubt UK housing will be involved in a future financial crisis: government policy. UK planning regulations are extremely tight. This is why London rents are so high; this is why British houses are the smallest in Europe; this is why getting planning permission makes a plot of land many multiples more valuable. Simply put, too few houses are built because builders are not allowed to build them. On top of that, the government has introduced Help to Buy, which appears to be driving house prices up rapidly with little boost to supply. Altogether, this suggests house prices are very unlikely to fall enough to generate a financial crisis like we saw in 2007-08. And if they looked like doing so, the government would be likely to stop them. Ben Southwood is head of macro policy at the Adam Smith Institute."