How we subsidise estate agents' pay packets: Sebastian O'Kelly's Market Watch

After a summer of price rises, the posher London estate agents can begin dreaming of everything returning to 'normal'.

For them, this means another bout of house price inflation, with double-digit annual growth, giveaway mortgages, ludicrous City bonuses and the rest.

Rampaging property prices can only be good news for a profession that contributes zilch to the wider economy but does a great trade in constantly reselling the family silver.

estate agent

Estate agents push for house price inflation but we taxpayers have to foot the bill

They have to eat, one might feel. But the trouble is that we pay for a good deal of this, subsidising high house prices with our taxes, possibly by as much as 1.5p on income tax.

For a start, we have to accommodate the losers in the housing boom who are priced out of the market. Even the rental market. Housing benefit subsidises rents for those on low incomes to the tune of £17billion in 2008/09. The total was £12billion in 1996/97.

A further £2.6billion is spent on constructing affordable homes - up from £727million in 1997/98 - and this year the Government announced a National Affordable Housing Programme, which will spend £8.4billion over three years.

Then there are the various Homebuy schemes, which are direct subsidies for shared-equity housing.

Thanks to high house prices, these are available - absurdly - to households with incomes of up to £60,000. That's 90 per cent of the population. If everyone who is eligible applied, there wouldn't nearly be enough money in the kitty.

Homebuy Direct, which helps first-time buyers afford unsold newly built homes, will cost taxpayers £400million this year; My Choice Homebuy another £126 million.

Even the £400 million a year which developers pay towards social housing through Section 106 agreements is a form of subsidy.

While not a direct burden upon taxpayers, first-time buyers have to bear the cost through house prices that are higher than they otherwise would have been.

Housing was always recognised as one of the great social needs and no politician, in the absence of Alan Clark, wants to see the poor on the streets. But it comes at a cost.

Estate agents and investors in residential property do very nicely when the market starts flying. The rest of us pay twice over: in taxes and through high house prices.

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