Saturday, 5 July 2014

House price boom good for society?

The Evening Standard ran a poll that found that 50% of Londoners were opposed to the house price boom. Of course. They're the 50% that aren't owner occupiers and have no prospect of being so - many of them singles. And neatly avoided by the banks in the media fuss about their looking at gym memberships or money spent on takeaway pizzas was the one key indicator they will be looking at when granting a couple a mortgage - how stable their relationship is. 

For it's only now couples in London who can get on the housing ladder - with 4.5x joint income mortgages. Singles would need a loan of 9x their salary. So the banks will be evaluating the stability of the relationship; how long they have been together, whether they intend to have children and so on. St Paul may have declared 'marry or burn' but the real choice for young London professionals is now 'marry or live in rented accommodation all your life'.  

And this of course is by far a more powerful incentive to marriage and family life than the £500 tax bonus that Osborne can offer. The law of unintended consequences strikes again ... but this time for the better?


Anonymous said...

London, London, London. It's all about London. Now I happen to like London, I lived and worked there for two years (Cable & Wireless, Red Lion Square) but I do get irritated when I hear a weather forecast that focuses on London and the so-called house price boom in London. Why? Because the so-called recovery has only just started to creep north - seriously, the economy (in London) might be improving, but we need to get some "trickle down" or should I say trickle up, here in the north west and other regions that aren't London.

This has me in mind of the Spitting Image sketch where Leon Brittan is asked about, err, Britain and he says, "there are two halves to Britain; the south and the err, err, err, the other bit"

Coney Island

Anonymous said...

I reckon that the imposition and maintenance of the "green belt" is the main cause of these market bucking prices, and rampant immigration does not help.

So unless we make a stab at controlling EU immigration (by leaving), and abandon the 1930's green belt concept, which was supposed to stem what was called "ribbon development" (you see it a lot in Spain), where new developments stick closely to the main roads into and out of a large conurbation, prices are going to continue to move ahead of the rest of the country.

The problem for young Londoners is really not about, not being able to afford to buy, it is more about not having any security in rented property.

This is where other countries, seem to have made a better fist of the rental market. Rents are generally controlled, which discourages the buy to let market. Some families rent their homes for more than one generation, and this is because the landlord is often the church, the university or some other major institution...

...These organisations aren't looking at their pension pots, they are looking at the next two hundred years... (well perhaps a bit far fetched!). This way of regarding the rental market, puts a completely different spin on renting, it becomes a social norm, rather than something you do when you can't afford to buy.

Raedwald said...

CI - Yes, you're right of course; London is really a semi-detached part of the UK, not really British any more but an international city. But until tax-raisng powers are devolved (97% of all UK tax is levied in London)- and Miliband's silly gimick to devolve some spend decisions but not tax decisions is a nonsense - then it will remain the centre of the political universe.

And yes, renting should be more long termist - but avoiding the chasm of the Portuguese error, where rent and possession controls are so far in favour of tenants that hundreds of wonderful old houses in Porto are empty and falling down, worth more as derelict sites than burdened with low-rent tenants

DeeDee99 said...

I'm not sure that wanting to own your own home is the best incentive for marrying someone.

A bad marriage and a highly mortgaged property can eventually feel like a prison!

Anonymous said...

DeeDee99: "A bad marriage and a highly mortgaged property can eventually feel like a prison!"

Marry in haste, repent at leisure.

Especially if you married for the wrong reasons in the first place.

Budgie said...

No, the house price boom is not good for society. It twists the financial decisions of both the state and the public.

Those who buy tend to unfairly benefit over the long term. Those who cannot (nowadays the young) are locked out: also unfairly. And the whole economy tiptoes around the political impossibility of doing anything about it.

Without immigration we would have a stable or slightly declining population. So we would only need to build new to cope with house replacements, and the increase in family break-ups.

Anonymous said...

The demographics are still finely balanced. About 33% are in the 'we'd like to buy a house' age range, about 33% are in the 'we've got one so don't rock the boat' range and about 17% are in the 'we bought ours for £20K' range. As time passes the middle bracket becomes the old bracket which could with some competent message manipulation be persuaded that they should vote to extend the Green Belt. With a similarly focussed campaign the young and getting more numerous group could be persuaded to get off their arses and vote similarly. But given the uncertainties I doubt it looks an election winner just yet, but the young could force it. So if you are young ask your councillor or MP at voting time 'are you going to extend the Green Belt? - mate'. I suspect many will be unwilling to answer.

Exactly what effect this would have on UK plc I am not sure but I cannot think repeated house price bubbles are a good way to run the economy.

Demetrius said...

When I were a lad you had to marry and do some breeding to get council accommodation. The result was the baby boom time. Now look at what the baby boomers have done to us.

G. Tingey said...

Actually look at what all guvmints, since the Empire Windrush docked have done to us.
NOT "immigration" per se, but the craven crawling to the big, cheap employers to get in unskilled labour, whom they can underpay, exploit & cheat.
Doesn't matter whether tory or labour, they have all done it, with too many unskilled, underpaid people.
All for "the bosses" short-term profits.