In 2001 I considered buying a flat, only for dear family and friends to tell me not to, that the market was “due” a collapse, and that 2002 would be too late to make any money in the property market. The over-heated feeling was going to go away, and we would be dealt that pleasant euphemism: a “correction” in prices. The word “correction” is key, suggesting that something required righting, that a wrong had been undertaken and it took some mystical fiscal action to make it right again. But the mortgage business wasn’t listening and started ramming 105% mortgages on an interest-only basis at us (£900 commission, thank you very much) as if there was no tomorrow.
The whole premise of investing capital value in houses is that there very much is a tomorrow. In our country, we gather security from tucking our security into bricks and mortar. We set housing ownership very squarely and firmly on our Life “To Do” list, and part of the British psyche has been that if the aspiration to home ownership is not realised, we have in some very intrinsic and real way, failed. Our houses are a future security, a pain-free, no-brainer investment where money makes money makes money. This is all very well if you can release the capital, spend the cash on your grandchildren and the rest on a cruise, but the problem is you actually do need somewhere to live. This money isn’t for you, it’s for your descendants. For those of us who want a roof over our head, there’s only one way we’ll be leaving our houses and that’s feet first in a wooden box.
The current neglect to provide a whole generation with affordable housing will have an enormously detrimental effect. The social and cultural depth of this won’t be fully realised for a generation. When it is, the questions everyone will ask will be : Why didn’t control get taken and The Bank of England Monetary Policy Committee take charge? Why didn’t more Mayoral sponsored initiatives to house frontline workers in London properties get initiated? And, why didn’t those property investors who did so well out of the boom and who are installed in SW10 houses, who told us that the top of the prime market “topped out” in 2014 and was beginning to drop, live by their word, sell their properties and to take up renting instead? (I guarantee, even though I am arguing hypothetically from the future, that of the house-millionaire property investors and agents who disappoint hopeful sellers by telling them their Notting Hill house will be worth less in 2015 than it was in 2013 will actually sell up and get out of the market. Not one).
No one under the age of 30 who is not wealthy can afford to buy property in our city; Perhaps the moment for any “correction” of the housing market already passed. What is interesting is that no-one has questioned what the responsibilities of the property owning classes are in this crisis. Would there have been a boom, if we had not decided to capitalise from hysterical growth for our own security? The responsibilities do lie with Government legislation and with The Bank of England’s lack of firm decision-making, but the property-owning classes are the fuel that added to the fire, aren’t we? How can we not be when every one of us who bought a house built the boom?
Now, I’m not saying we have all conspired to ramp up property prices to unfeasibly disgusting levels, but I do think we are all negating the role that we played to some extent, because however you dress it up, it is morally corrupt to render yourself capital asset rich and stoke the flames of your profit knowing that in the act of doing so you are pressing a sizeable number of gifted young London bloods more and more in the opposite direction – into years of rental. I am not saying we should not have bought houses, but I find the role of the property purchaser an integral part of the whole mechanism, and one which is never focused on. Perhaps it is too much to expect capital investment to not be morally corrupt by its very nature.
There’s only so much blame you can lay at the door of the banks who sold cheap debt to those who wanted it. Those who wanted it – and took it – can’t blame the mortgage companies for the fact that they are now struggling to find another Lender who will take on their toxic, 95% LTV loans without pipping 2% above the deliriously low base rate. They can only blame themselves. It’s a bit like a child being offered sweets again and again and again and then complaining when they vomit and the sugar crash turns into a pile up. Well, you shouldn’t have bolted down that extra bag of barley sugars, son.
Affordability has been a key issue in London for ten years. All it has done in that space of time is worsen to the point of it becoming ludicrous. This is a stagnant market waiting to happen. Not a crash? I hear the naysayers standing at the sidelines with some parental cash and the long term view to watching for prices dropping No, not a crash – not in this region- but a stagnation. The only thing keeping it at bay is a London housing market with very little “to sale” signs in it. Interest rates will rise in 2015, very slowly, and with equal pace repossessions will bite. But the market will hover, stagnate and get a bit boring for a bit, without a crash. Then it will do what London always does – powers on, charges through and keeps on growing. If it doesn’t I’ll eat my flat.
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