> Banks set the amount.
Banks can't magically choose to write loans at unprofitable terms. They also can't write loans at noncompetitive rates in any sort of realistic quantity. These two forces (fear of principal loss through nonpayment/default, and loss of customers due to competition) dictate bank rates.
> If banks start lending $1MM to employees on the basic wage that is how much basic housing costs.
No. It will only cost that much for people unwilling to move away from highly competitive markets where construction is barred. For those living in areas which can be developed, housing prices will also be dictated by the cost of construction, which is presumably less than $1MM. Buyers will be pocketing the difference between the available $1MM and the cost of construction. This is to say that banks do not dictate prices for housing, but rather are only (sometimes) enabling (fools?) to go higher in an auction.
If banks did set prices for housing, they would have to also be setting the price of, for example, construction. Which is not the case, as that is dictated by the supply and demand of labor and materials.
Put another way: I'm sure in wherever you are, not every housing option is the same price. Do you honestly believe that banks are somehow dictating those price differences? If not, what is that force, and does accounting for it also account for the effect of increased credit availability on house prices? (A: supply and demand, yes)
> recently in the UK the govt said they would "help" buyers by contributing a certain % for buyers. Housing went up by that amount.
Yes, just like if you give everyone a raise by x% you'll see housing jump by that amount. As I've said in this thread several times already. This jump does not, however, represent a change in real cost to consumers (a change in the what percentage of their labor is being spent on a given good). As I've also said in this thread several times already.
> This is a waste of my time, I'm out.
Cya.