PINSTRIPE

WE have a distorted view of what a healthy property market is. The media believes it is one where prices rise by 5% to 10% each year - well ahead of wage increases and making houses progressively more unaffordable.

For those who have a lot of housing equity - broadly those over their mid-40’s - rising real house prices are a wonderful thing. For the younger generation they are a disaster - either they struggle to take on debt large enough to allow them to buy a home - and then become slaves to their mortgages or, increasingly, they give up and rent instead.

The generation which doesn’t have a decent pension arrangement and doesn’t have job security now increasingly doesn’t have a house they own and so, surprise, surprise, doesn’t vote or feel they have an economic stake in the wealth of our society. Added to this the anaesthetic - very low interest rates - which has made all this bearable will at some point wear off as interest rates rise.

Scotland already has an economic advantage relative to Southern England because of lower housing costs. We should, however, aim to do more, the desirable outcome - look away now if you have a big house - is that house prices should fall significantly in real terms over the next few decades. Here are some thoughts as to how we might do that.

First, we need to even out the geographic demand for housing. We complain about power being concentrated in London but then - when we get a bit of power of our own - we centralise it in Edinburgh - making the hottest spot for housing hotter still. The Scottish Parliament building should be turned into a block of flats and the Parliament moved to somewhere modest in, say, Stirling. The Fisheries department should relocate to Campbeltown, Agriculture to Dumfries , etc. - not just the back office - these locations are where the minister and top civil servants should be.

Second, we need to increase the supply of housing.

We do not have enough decent houses which are available for families to live in and yet there are tens of thousands of houses and other buildings which could be homes which are unoccupied every night. This should be addressed by a combination of higher council tax and compulsory sales orders. All buildings which are not regularly occupied and are capable of being houses (that derelict barn in the field, second home, unoccupied office block or old school) should either pay council tax as though they were a dwelling but at double the rate of a regularly occupied home or, if the owner decides not to do that, they should be put up for sale and sold to the highest bidder even if that bid is only £1. The owner would have three choices - use the building as a home for themselves or somebody else, pay extra tax for it or sell it.

The economic impacts of this would be helpful. The Scottish Government would have less pressure on it to build social housing, rents would reduce alongside prices so the cost of housing benefit would reduce. Both of these would ease the burden on the taxpayer allowing more money to be spend on things like infrastructure and education.

For business the benefits would come through lower wage rises ( but not lower living standards ) which would increase the competitiveness of our goods and services, reduced inflation and an increased ability to attract people to live and work in Scotland.

And the losers? Well it’s you and me. Sorry.

Pinstripe is a senior member of Scotland's financial services community.