Yesterday, we paid off our mortgage. When we (that is, my wife and myself) arrived in the UK in 1996, after about ten years working overseas, we had £60. Through a remarkable combination of circumstances, and the help of my mother as guarantor, we were able to buy our first house, for £53,000 with a 90% mortgage. In 2009, after that house had tripled in value, we were able to move to our dream home in Marlcliff, South Warwickshire. That we were able to pay off the mortgage is down to another remarkable combination of circumstances. We are (and feel) tremendously privileged and thankful to now own our own home. We are all too keenly aware that, for many people, circumstances are less kind.
A report released today indicates that today’s first-time buyers have now spent, on average, £52,900 in rent. Those who start renting now will, on average, spend £64,400 in rent before they buy. If they buy.
House prices are predicted to rise and rise. In December, Estate Agents calculated they would rise by 50% in the next ten years. I read the other day (but can no longer find the reference) that the average house price would rise into the millions. Rental is likely to rise even faster, according to the Royal Institute of Chartered Surveyors (RICS).
Back when I was a student, the belief was common that it was always best to buy, always worst to rent, because ‘property never loses its value’ and ‘rental money is wasted money’. Flooding, subsidence and a couple of house price bubbles later, it is no longer quite as certain. Many people lost money on negative equity, or on homes that became unsaleable. Likewise, people who exercised their ‘right to buy’ in certain parts of the country discovered that house prices went up dramatically everywhere else, but not where they lived.
Nonetheless, ‘getting onto the property ladder’ was and has been the dream, the aspiration and the aim of many newly married (or definitively not married) couples over the last thirty years. Thirty years ago, it was possible to buy a property by combining a couple of student grants and renting out the other rooms (one of my friends and his brother actually did this). Twenty years ago, as we found, a stable parental income as guarantor and help with the deposit could get a nice, four bedroomed house in the most deeply unfashionable part of Birmingham for a couple of ex-charity workers. Ten years ago, those without access to the bank of mum and dad were already struggling. Today, most couples who do buy don’t buy until they are in their 30s. If they pass 40 without buying, they will find that mortgage lenders eye them with the deepest suspicion, unless they already have a very sizeable sum to put into the deal.
That’s couples (of all kinds). What about singles? Not everyone wants to commit their life definitively to another person. Many people who do want to discover, after some time, that somewhere something breaks down, and the life together becomes the life apart. Our society idealises the single state, and yet conditions for singles when it comes to buying a property are worse than they have ever been.
How much is a house really worth? The answer, as the TV show tells us, depends on three factors: location, location and location. London is clearly a very good location (if you own) or a very bad location (if you rent), but the whole of the UK is dramatically overpriced compared to the rest of the Western World. It is not because Britain is overpopulated. Belgium and the Netherlands have dramatically denser populations, and yet don’t suffer the housing pressures and costs that we do. This is one thing that no one can blame on the EU (though I’m sure someone will try).
To a large extent, it is something we have done to ourselves: we all want to live in the most desirable locations. The presence of a good school pushes property prices (pardon the pun) through the roof. For three generations, since the Second World War, we have been willing to pay over the odds to get the house we want, knowing that gradually rising salaries, and the glorious day when we finally pay off the mortgage, will make it all worthwhile.
This is not in any sense a matter of ordinary inflation. Housing is a scarce commodity, and scarcity puts prices up. And so, those with access to bank of mum and dad, or highly paid jobs early in their careers, or legacies, or trust funds, are able to buy straight away. Those without, but in good jobs with stable dual incomes, perhaps putting off kids until later, will pay rather more than the average of £53,000 in rent before they buy. Many others will never get onto the property ladder, and will see other people’s portfolios get fatter and fatter, while their hard-earned cash goes into the hands of landlords (which is not to say that landlords are not facing their own problems as well).
Everyone is behaving—as economists would put it—rationally. No one is behaving maliciously. And yet, the result is that the rich get richer, and inequality in British society grows—not only between the haves and the have-nots, but between south and north, London and everywhere else, the nice parts of town and the less nice.
At the last election, every party promised to sort this situation out, building (as an average among party promises) 200,000 new homes a year. Where are these new homes? This is not a pop at the Conservatives. The Coalition did little better, and the Labour government before it did equally badly. The Scottish parliament and Welsh assembly have done little to address it.
Everyone needs somewhere to live. Only about 5% of Britain’s surface area is built on. How can it be so hard?
Of course, everything is much harder than it appears. The nest of problems which sees property prices soar in London and actually sink in other places, which makes it hardest to build where it is most needed, which makes it advantageous for property developers to ‘land bank’ until the prices rise, which pushed up an unsustainable rise in buy-to-let, which for generations distorted the market through an ungraduated stamp-duty (mercifully corrected by the Coalition), which continues to distort the market through an unreformed council-tax banding system which makes property dramatically undertaxed compared to other things—these and ninety-nine other things cannot be unpicked by one sweeping gesture, but must be dealt with one by one.
It is the job of government to do this. We have been distracted by an unnecessary collection of referendums, an entirely fruitless Conservative party internal wrangle over Europe, which we, the public, are now forced to adjudicate, by an obsession with the national debt and the needs of austerity, by an entirely unnecessary and costly reorganisation of the NHS, by a misconstrued attempt to reorganise education which failed to ignite any support from teachers, and by a mean-spirited response to the needs of refugees which casts us as a nation in an extremely (but sadly not uniquely) poor light.
I would love to be able to thump the table at this point and say ‘and what government must now do is…’ But, as I said before, there is no single, sweeping solution. What government must do now is what government should do, always: administer diligently for the benefit of all, not merely for the quarter of the population that actually voted it in. In this matter, diligent administration requires listening to RICS and other industry bodies, actively consulting with local people who, if not brought round, will naturally and not unreasonably oppose the unknown of a new housing estate built right on their doorstep where a coppice with owls currently stands, and redesign its own instruments, including taxation and planning, to make housing as a whole affordable to all—rather than merely building in a proportion of ‘affordable’ homes within estates of luxury accommodation. There is an element of haste in this. The current generation of home-hunters will have to scrimp and save if they want to buy, and quite possibly end up paying more if they decide they can’t. The next generation, if the trends continue, will be camped out in mum and dad’s garage, or occupying abandoned public buildings, or working three jobs and impossible hours, all just to get by. We cannot wait for this problem to solve itself. It has never shown any sign of doing so, and there is now no time left to wait.
Somewhere to live is a fundamental human right. If we, as a nation, cannot structure our housing market so that everyone has a home that they can afford, then, really, what good are we? Shame on us.