So last night in one of my trademark streams of barely comprehensible bile I Rage-Tweeted;
Sitting down with lunch today, I caught up with this from Ampp3D;
“House prices increased by 5.4% in November 2013 compared to the year before, which means the average price of a house in the UK is now £248,000.
London continues to accelerate away from the rest of the country with an 11.6% annual rise, more than double the UK average.
The mean price of a house in London is now £441,000, which is 177% the average UK house price. That’s also 25% higher than the pre-recession peak of £350,000″
What had irked me in the first place was news that – unsurprisingly – a 1/3 of the volume of former Council Houses in the London that had been made available under the “Right To Buy” scheme have ended up in the hands of private landlords. This coupled with the changes to that scheme for 2014 that increases the discounts available to 70% of the property’s market value stopped me momentarily from writing about our terrible plastering to vent.
Now, time to collect up all your rotten fruit and take aim; I am a landlord. Not only am I a landlord, but one that doesn’t accept housing benefit. OK, I am only a landlord because I have a former home of mine that I was unable to sell when I needed to move to London for work a few years ago (and still can’t, despite the apparently flourishing market) and I don’t accept housing benefit as I don’t really want the the tax payer paying my mortgage for me (as misguided a personal policy as that may be). I don’t make a penny, indeed the rent I receive is about 75% of the mortgage that I continue to pay. Obviously, this is just disclosure, I don’t wish sympathy (and never accept property investment advice off me, natch).
How property inheritance is starting to matter
Setting aside my mini-Rachmanesque property empire for a moment [cough], and getting back on-subject, we’ve slept-walked back into an age where inheritance, especially that through property has become the primary vehicle for social mobility. Just think about that for a moment. Not education, not employment, not being a striver (or whatever passive-aggressive term our current betters had designated 99.9% of the population in an attempt to divide and conquer us by), but by how successful our parents and grandparents were in obtaining property.
This is a situation that the UK has not been in since the end of Second World War; a conflict that was followed by three decades of general cross-party political consensus towards citizen advancement through education, healthcare and social housing (“Council Houses”).
Step back in to Julian Fellows’ grandly staged soap opera of “Downton Abbey” and it is dominated by issues of inheritance; indeed my recollection of whizzing through the first couple of seasons was that it was entirely about who was going to inherit the estate.
If you’re looking to be able to buy yourself your own home and you’re a fan of Downton you’re in luck; you now get to live though your very own version of the show, whilst tragic-comedically waiting for a close relative to die so you can afford to put down a deposit on a place of your own. Hurrah!
The race to the bottom
Taking a break from writing this post, I read Polly Toynbee’s latest missive for The Guardian where she focuses on our borough of Newham and cites a case only a few hundred yards from our project house.
The primary reason that we ended up buying in Newham was its affordability. Even though it was in a pretty poor state, it’s a 15 minute walk in either direction to a tube or a National Rail station (which will become a Crossrail stop in 2018) and you can be in the Square Mile from our front door in 30 minutes, yet cost us less than the UK national average, let alone that for London.
One one occasion while searching for a place to buy, we took in a block booking on a cheap-ish place with a dozen or so other people, and stumbled into an HMO (House of Multiple Occupancy) which was not dissimilar to that described in Toynbee’s article. Certainly not legal or council-registered; we were told not to worry about the fact there was a family living in each room “…the landlord says he can get rid of them ‘like that’…”. The house sold almost immediately to someone who presumably was prepared to business with someone with such a small shred of humanity. We were not.
There are scores of properties across the borough being run in this way, with thousands more across London (and for that matter, the rest of the UK), and there’s me with my tiny bit of savings propped up by a small inheritance from my last remaining grand-parent using it to put down a the smallest deposit I could to buy a 50% share in a house with my other half, feeling like the landed gentry by comparison. Because, that’s what I now am. Lord Matt of Hero.
The notion of profit from housing
I don’t blame people for wanting their property to go up in value. I don’t blame people for enacting their “right to buy’, waiting 5 years and then selling on at a massive profit. Blaming people for taking advantage of a system, perhaps the only system that allows almost anyone to make a few bob, without blaming that systems’ architects somewhat misses the point (and is not helped with headlines like “Homes ‘earn’ Londoners more than their jobs as house prices soar” in the Daily Boris).
We’re probably alone in not wanting the value of our house to go up, but then we’re in the advantageous position of not needing to profit from it. It’s a home, not an investment vehicle and bought at a level where, should one of us not be in a position to pay our share, the other could pick up the slack. However, what is keeping the prices in this area relatively affordable is Stamp Duty with kicks from 1% to 3% once your property purchase surpassed 250k UKP.
The fact is that many people are caught in one of two traps; either trapped outside the housing market, increasingly awaiting some kind of property derived inheritance or trapped inside where there only chance of improving their long-term financial plans is a rise in the value of their house (especially considering the below inflation rises in wages, if any is forthcoming that is). ‘Many people’ that is, aside from those who come from financially poorer backgrounds, especially those too young to have had ‘Right To Buy’ as a welcome get-rich scheme.
This dependence on the value of the housing stock explains our national obsession with house prices. It doesn’t matter whether you’re in the house looking out, or staring through the windows from the outside, possession or inheritance of property defines the ‘haves’ and ‘have nots’ in contemporary Britain.