While the price of homes appreciates (seemingly) beyond all reason, home sale numbers/volume in the UK will never reach pre-credit-crunch levels ever again.
Like cinema ticket sales competing with the convenient alternative of rental video and the VCR (and subsequently DVD and Cable/Satellite service), sales of homes depends on the middle class being able to conveniently purchase (affordability x available stock).
The rise of Landlordism, Land-banks and Luxury flats
A combination of rampant property price inflation, landlords beating owner-occupiers to bargain properties and a continuing reduction in 'available' housing stock lead to less home sales being probable.
Builders focus almost entirely on the 'top end' of the market: luxury flats, luxury homes and luxury concierge services. Land to build on is being held in so few hands, that it is impossible to find affordable land for affordable homes. The likes of Lord Rogers can talk all they want about the facts of there being enough brownfield land to build on (he's right, there is); what he forgets to say is this land is privately owned and therefore too expensive to liberate.
With limited stock on the market, landlords (people with money) can afford to pay more and get that property first:
Landlords are the pawn shop that buys your property and charges lots more for you to buy it back. Albeit they don't let you keep it forever.
Landlords don't sell. They have no incentive to. So there's less stock for owner-occupiers to compete on, pushing prices up faster. Making competition amongst the have-nots, that effectively pushes up the value of property already owned by the collective haves.
With fewer owner-occupiers needing to sell + Subsidised landlordism = more property in fewer hands. And yes, when the government pays landlords to house people, the business of being a landlord is subsidised. Not least because interest rates are unnaturally low, which drives capital to rental property.
Whatever criticisms levied at Piketty, anecdotal evidence suggests he is right: money makes more money, faster, than producing a product or being entrepreneurial.
Someone once told me: "money goes where it is treated best". If interest rates are low, the middle class will spend, not save (for a house purchase deposit), and the already-wealthy will buy real estate (and never sell).
All mass transit leads to Mayfair
Central Line, Piccadilly Line, Victoria Line, Jubilee Line, Crossrail all built to place Mayfair at the centre of the connected world via Green Park and Bond Street Stations.
Better transport is the single biggest contributor to property price inflation. Far more than under-supply, good schools or low crime (all of which are also characteristics of Mayfair).
He who has the gold, makes the rules. i.e. Politicians don't get campaign funds from the poor or middle class. And ultimately Politicians choose where massive transport infrastructure money is spent. Case-in-point: HS2, the railway to bring prosperity to the North of England, is being built in London. London which is the 'millionaire capital of the world'.
The Normans set the 'norm'
After Harold took an arrow to the eye in Hastings, land laws (and rights) have been shaped primarily since the Normans took over and redistributed the spoils of war.
But other than 'Lording' it over the young and poor, there are two other demographics that fuel rental price inflation across the UK: students and immigrants.
More students + more immigrants = more rental property demand = rising house prices
For these two groups, sharing the private rented sector with the 'working poor' and those 'on benefits' creates a massive amount of demand.
So while there are many 'accidental landlords' with less than 3 properties, there are a few massive landlords who cater for the rest. Who are these landlords? Descendants of The Normans whose family wisely held on.
Quirks of Democracy
Former CityAM Editor Allister Heath comments today on how the UK planning/regulatory system is to blame for increasing property prices due to restricted new supply. He's right. But he's also wrong: the planning system didn't stop councils building low-cost homes. Democracy did that. The ever-increasing lust of home-owners requiring unending property price inflation is the sole focus of politicians wanting to capture 'middle-ground' voters. Pandering to existing home-owners and paying lip-service to aspiring home-owners shapes much policy.
Landlords pay either Corporation Tax (property held in companies) or Income Tax (after 10% wear and tear allowance).
Renters generally pay National Insurance contributions on top of Income Tax, something that landlords will never have to pay for their unearned income. This inherent financial advantage is an interesting quirk of our democracy, where 'homeowners' vote and the young 'rentysomethings' don't.
PAYE (I.T. + N.I.) = poor middle class that cannot save for a deposit < wealthy who only pay on lower rates on larger amounts of 'income'
UK Council Tax is notoriously linked to property valuations that have no bearing to the modern pricing of homes. As a result, those who own valuable property pay just as little as those renting a much less valuable home.
However, these are trifling details. There is a more recent innovation in local government that effects housing that is far more concerning:
Councils accept legalised bribes to allow tower blocks to pass planning; it's called Community Infrastructure Levy (CLI). CLI is calculated on the 'net additional floorspace created'. The incredible number of planning permissions granted for tower blocks in London is no mere coincidence. This also explains why councils are blocking office-to-residential conversions under permitted development (they don't get paid their bribe/CLI).
Real estate is a game. It's a game we've all played. Those who pass Go first dictate the game. When you next play Monopoly, you'll also notice how those with the most cash/properties subtly start changing the rules of the game to suit them.