Britain’s Housing Market is Plagued by Property Speculation, Not Low Inventory
By Sarah Kennedy @ Real Estate Daily
February 7, 2018

Britain’s housing market is in the midst of a serious affordability crisis, and low inventory is not the problem, says director of policy research in Macroeconomics Ann Pettifor. The government needs to limit property speculation and better regulate the mass amount of capital pouring into the UK property market to help deflate home prices.

Key Takeaways

  • Unchecked property speculation is inflating home prices in Britain
  • Stricter government regulation would help deflate Britain’s housing bubble
  • A property speculation tax or Tobin tax would help regulate the capital pouring into Britain’s housing market


Most major headlines about the UK housing market have lamented low inventory as the cause of the recent housing crisis. Britain’s property market, however, is more burdened by unchecked property speculation than low housing supply.

Investors and consumers alike are turning towards the UK housing market because it provides quick and sizable returns backed by physical, low-risk assets. This increased activity has inflated home prices and created a housing bubble in Britain, and the government must help deflate it before it pops.

More housing inventory will not solve the problem because there is already enough capital flowing into the UK property market to offset new construction. The market would simply absorb more cash.

Past evidence points to a forced correlation between increasing housing supply to help dampen prices. There were about 28 million homes in the UK in 2014, but only 27.7 million households in 2016. In Ireland – a country of just 4 million people – more than 90,000 homes were built in 2006, but home prices still jumped 11% that year.

The solution to Britain’s housing problem, says Ann Pettifor, is more regulation over property speculation. Germany has a property speculation tax for those who own second or empty homes that encourages investors move their cash elsewhere in the economy.

Britain could also enact a Tobin tax to regulate speculative capital flow in and out of Britain. A tax like this would help tame the massive amount of international capital pouring into Britain, and in turn, help deflate home prices.