New flats in the former Olympic Village in Stratford, east London. (Photo: Getty)
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This is no recovery, it is a spending boom powered by unsustainable house price rises

Having failed to usher in the export-led recovery he promised early in the coalition, the Chancellor instead latched onto house price inflation as one of the mainlevers of a consumer spending boom.

London’s property-owning classes are looking increasingly smug again as barely a week seems to pass without fresh data that their homes are spiralling exponentially in value. The latest update from the Nationwide shows house prices in the capital up by an astonishing 18 per cent in the past year. It’s not just London, now, either: with price rises rippling out across the rest of the country, the feelgood factor is spreading. But should it be?

There are important objections to be made about the growing divide between London and the rest of the UK, as well as the plight of first-time-buyers having to borrow ever greater multiples of their salary (if they can afford to buy at all). Then there is the knock-on effect to prices in the private rental market, rising homelessness, the list goes on. Even homeowners who may think they are benefiting from the rises are in fact getting poorer if they ever hope to move to a bigger property.

But there is a deeper reason why we should all – including propertied Londoners – be concerned about recent house price growth rather than taking heart at its renewed vigour, which is that the strength of the market in recent years has sowed the seeds of its own volatility. Of course there are fears of a bubble and whether the growing price-to-income ratio is sustainable. The truth may be that it already isn’t sustainable, but for one factor: hot money.

London property has in recent years become the investment vehicle of choice for international capital seeking a safe haven, as we at Civitas detailed in a recent report. In the wake of the worldwide economic downturn, turmoil in the Middle East and super-loose monetary policy, our capital’s housing stock has soaked up billions of pounds in global capital flows. This has only been encouraged by George Osborne.

Having failed to usher in the export-led recovery he promised early in the coalition, the Chancellor instead latched onto house price inflation as one of the mainlevers of a consumer spending boom that, he hopes, will get the Tories through the next general election. He didn’t just bet the house on this strategy – he bet everyone’s house on it. It is an easy gamble to embark on because so many homeowners are too easily convinced that large price rises are in their own best interests.

But central to encouraging house price growth in an already expensive market is encouraging buy-to-let (and even “buy-to-leave”) investors, many of which are non-resident. There are arguments to be made both for and against overseas buyers,but one potentially catastrophic problem is already looming into view, the only thing worse than so much foreign capital driving up prices: that now this money suddenly vanishes.

As central banks begin to raise interest rates around the world, as sterling strengthens with the economic recovery, much of this hot money will disappear. The threat of this taking place within the next year or so is raised in a new report from Deutsche Bank but there have been warnings for some time. The consequences of this for the rest of the market, and for the wider economy, could be deeply unpleasant.

But investors using the housing market to make money, and the volatility that follows, are not the root cause of the problem. What lies behind all of this is a collective weakness among voters for seeing their properties grow in value. Hopefully this will recede as the number of people priced out of the market continues to rise. But until it does, politicians will never build enough homes to level out prices, and the economy will remain beholden to a rollercoaster housing market.

David Bentley is co-author of the Civitas report ‘Finding Shelter: Overseas investment in the UK housing market’.

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The Women's March against Trump matters – but only if we keep fighting

We won’t win the battle for progressive ideas if we don’t battle in the first place.

Arron Banks, UKIP-funder, Brexit cheerleader and Gibraltar-based insurance salesman, took time out from Trump's inauguration to tweet me about my role in tomorrow's Women’s March Conservative values are in the ascendancy worldwide. Thankfully your values are finished. . . good”.

Just what about the idea of women and men marching for human rights causes such ill will? The sense it is somehow cheeky to say we will champion equality whoever is in office in America or around the world. After all, if progressives like me have lost the battle of ideas, what difference does it make whether we are marching, holding meetings or just moaning on the internet?

The only anti-democratic perspective is to argue that when someone has lost the argument they have to stop making one. When political parties lose elections they reflect, they listen, they learn but if they stand for something, they don’t disband. The same is true, now, for the broader context. We should not dismiss the necessity to learn, to listen, to reflect on the rise of Trump – or indeed reflect on the rise of the right in the UK  but reject the idea that we have to take a vow of silence if we want to win power again.

To march is not to ignore the challenges progressives face. It is to start to ask what are we prepared to do about it.

Historically, conservatives have had no such qualms about regrouping and remaining steadfast in the confidence they have something worth saying. In contrast, the left has always been good at absolving itself of the need to renew.

We spend our time seeking the perfect candidates, the perfect policy, the perfect campaign, as a precondition for action. It justifies doing nothing except sitting on the sidelines bemoaning the state of society.

We also seem to think that changing the world should be easier than reality suggests. The backlash we are now seeing against progressive policies was inevitable once we appeared to take these gains for granted and became arrogant and exclusive about the inevitability of our worldview. Our values demand the rebalancing of power, whether economic, social or cultural, and that means challenging those who currently have it. We may believe that a more equal world is one in which more will thrive, but that doesn’t mean those with entrenched privilege will give up their favoured status without a fight or that the public should express perpetual gratitude for our efforts via the ballot box either.  

Amongst the conferences, tweets and general rumblings there seem three schools of thought about what to do next. The first is Marxist  as in Groucho revisionism: to rise again we must water down our principles to accommodate where we believe the centre ground of politics to now be. Tone down our ideals in the hope that by such acquiescence we can eventually win back public support for our brand – if not our purpose. The very essence of a hollow victory.

The second is to stick to our guns and stick our heads in the sand, believing that eventually, when World War Three breaks out, the public will come grovelling back to us. To luxuriate in an unwillingness to see we are losing not just elected offices but the fight for our shared future.

But what if there really was a third way? It's not going to be easy, and it requires more than a hashtag or funny t-shirt. It’s about picking ourselves up, dusting ourselves down and starting to renew our call to arms in a way that makes sense for the modern world.

For the avoidance of doubt, if we march tomorrow and then go home satisfied we have made our point then we may as well not have marched at all. But if we march and continue to organise out of the networks we make, well, then that’s worth a Saturday in the cold. After all, we won’t win the battle of ideas, if we don’t battle.

We do have to change the way we work. We do have to have the courage not to live in our echo chambers alone. To go with respect and humility to debate and discuss the future of our communities and of our country.

And we have to come together to show there is a willingness not to ask a few brave souls to do that on their own. Not just at election times, but every day and in every corner of Britain, no matter how difficult it may feel.

Saturday is one part of that process of finding others willing not just to walk a mile with a placard, but to put in the hard yards to win the argument again for progressive values and vision. Maybe no one will show up. Maybe not many will keep going. But whilst there are folk with faith in each other, and in that alternative future, they’ll find a friend in me ready to work with them and will them on  and then Mr Banks really should be worried.