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The house price disease

I call this a disease because it is bad for the country's social and economic health. As Conservative peer David Willetts has argued, house price inflation tends to funnel wealth from the young - who must pay high rents and mortgages - to older home-owners. This isn't just of dubious equity. It contributes to weak and unstable economic growth.

For one thing, if youngsters spend an ever-growing proportion of their incomes on housing then resources are being transferred towards a sector with low productivity growth and away from more dynamic sectors. That depresses aggregate productivity growth. What's more, if we older people can get rich simply by watching our house price rise, we'll have less incentive to work and save. This too reduces economic growth.

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