Din said, on the topic of new development tending to push up the price of existing homes, not down:
I can see an issue with statistics that could affect the calculation of the average house price when new houses are built.
The new houses will be in less desirable location areas and so they will in fact be cheaper than the established houses. Therefore a naïve calculation of all house prices that does not take that into account will conclude that in the short term the average prices have gone down and incorrectly include the established houses in that statement of price movements.
Correct. We have to compare like with like and just look at selling prices of pre-existing homes before and after the new development.
Then people just start making stuff up:
The new houses will be in more desirable location areas (1) (less social housing) and bigger (2) and so they will in fact be more expensive than the established houses(3). Therefore a naïve calculation of all house prices that does not take that into account will conclude that in the short term the average prices have gone up...(4)
WTF?
1) Clearly, you build houses in the most favourable locations first - overlooking the river, the sea or the park, near the station, near the shops; the newer homes will be further away from all these lovelies.
It is only in very expensive/densely populated areas where it is just about worth while knocking existing houses down and building more densely that the new homes are in the most favourable locations - happily, the study focused on "suburbs or villages" so we can more or less rule this out.
2) From The Independent: "The average floor space for a dwelling in the UK as a whole is currently 85 sq metres, whilst new-builds average only 76 sq metres"
3) Any real life evidence for this? According to Nationwide, there's actually not much in it - average price of 'new-build' currently £192,434, average price of 'older' a shade higher at £192,434.
4) He has missed the point anyway, the point is to compare like with like, and it is pretty clear that this is exactly what the LSE did, i.e. they looked at selling prices of pre-existing homes, which went down slightly during construction period and then went up even higher afterwards.
Something else we ought to mention is s106 Agreements, whereby the developer has to fund all sorts of goodies to keep the local NIMBYs happy, you don't need to know much about economics to realize that these will push up values of existing homes.
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