LONDON (Thomson Reuters Foundation) - Land is Britain’s most valuable asset, increasing more than fivefold since 1995, the country’s statistics office said on Tuesday, prompting calls to introduce a new tax to curb a soaring housing market driven by rising land prices.
Land is worth 5 trillion pounds ($7 trillion) and makes up more than half of Britain’s value, the Office for National Statistics (ONS) said.
“Pretty much all of the problems in our housing system can be tracked back to the land market and the fact that land prices are outrageously high,” Toby Lloyd, head of policy at the housing charity Shelter, told the Thomson Reuters Foundation.
“It’s making housing absolutely, appallingly unaffordable.”
Average British house prices have more than doubled in the past two decades, and more than quadrupled in London. But average wages have risen by only a fraction of that amount.
By separating the value of buildings and land for the first time, the ONS showed that land value grew much faster than other assets, such as houses and machinery.
As the stock of land is fixed and housing is in short supply, continued growth in land value is not surprising, said Julian Jessop, chief economist at the Institute of Economic Affairs, a free-market think tank.
The latest data sharpened calls to tackle Britain’s housing crisis by introducing a tax on the value of underlying land, rather than property, a proposal made by the opposition Labour Party in its 2017 manifesto.
“The longer that this goes on, the stronger the case for introducing a land value tax to make sure that this scarce resource is used efficiently and fairly,” Jessop said.
Rapidly escalating land prices also deprive other sectors of the economy of capital, said Sara Mahmoud, a senior economist at the New Economics Foundation think tank.
“Banks would rather lend on things like mortgages or against commercial real estate than lend money to new businesses or (towards) innovation and development - the types of asset that power our economy,” she said.
($1 = 0.7443 pounds)
Reporting by Ruairi Casey @Ruairi_Casey, Editing by Katy Migiro. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights, climate change and resilience. Visit news.trust.org