House prices rising! And other reasons to be cheerful

By Heather Kennedy

House prices riseAs if the Royal Birth wasn’t enough to send us swooning into the crowded streets, feverish with joy, now the news that house prices have reached a dizzying seven year high!

To understand exactly why this news is being hailed a reason to pop out the bubbly, we must first take a detour through the Mad Hatter world of neo-liberal logic.

House prices are rising. Ergo we’re all feeling happy and flush. Ergo increased consumer demand. Ergo property developers will be coaxed into build more houses. Ergo…hang on a minute.

I talk to a lot of people who’d love to buy a house and for none of them is the barrier a niggling concern that now might not be the most economically advantageous time to splash out. No, the problem is much simpler than that. You see, people actually haven’t got the money.

Is the Government so oblivious to the realities of not being wealthy that they suppose whilst we’ve been moaning about inflation, zero hour contracts, pay day loans, we’ve secretly been stashing great wads of dosh under our mattress for a rainy day?

Of course the Government’s Help to Buy scheme is supposed to be salvation for first time buyers. But to be accepted onto the scheme in London you need such hefty sums that low and middle earners are knocked out the game.

And who has been the biggest victor from this explosion in cheap mortgages? Everyone’s favourite Striver, the buy-to-let landlord. They’ve been toiling all summer long to buy up homes that might otherwise go to first time buyers, but will instead be let to people at inflated rents, eroding any hope they might have held to save for a deposit.

It’s not only unwashed hard liners like me who are suggesting all this is lighting a match for the next housing bubble.

On closer inspection we see this surge in house prices is accounted for almost entirely by properties in London, where not even George Osborne in a Pimms-fuelled bout of euphoria would dare claim the market is opening up for first time buyers. In places like the Midlands where a handful of young people have managed to buy properties (national headline news you’ll note) house prices have only crept up by a measly 1%.

The pursuit of decent housing that meets people’s needs strikes me as a fairly straight forward notion. Yet the Government approach this pursuit like an ancient cryptic riddle, employing complex trickery to soothe and coax the property market which prowls, as deadly and unfathomable as a sphinx.

Cynics amongst us might conclude the Government aren’t bothered about providing decent, secure, genuinely affordable housing at all.

Instead of engaging in a combination of fiscal hocus pocus and wishful thinking here are some practical ideas for meeting housing need, ideas which will probably baffle MPs in their simplicity:

  1. De-criminalise squatting
  2. Regulate so developers have to build the homes people actually need (genuinely affordable ones of mixed sizes) not the housing that attract wealthy non-doms from overseas (swanky apartments with rippling neo-modernist frontages)
  3. Invest more money into bringing empty homes back into use
  4. Legislate to stop developers sitting on properties until they can squeeze the optimum amount out of buyers
  5. Regulate the private rented sector, starting with rent caps, a register of landlords and an end to retaliatory eviction
  6. Build more social housing
  7. Build more of other types of affordable housing
  8. Just build more genuinely affordable housing

Any more suggestions? Please post them below!

9 thoughts on “House prices rising! And other reasons to be cheerful

  1. I couldn’t agree more Scotty. What we need to realise about the current housing situation where more people are pushed against their will into an overheated private rented sector where they’ll be ripped off, is it makes the rich richer and the poor poorer. At quite an alarming rate. In the UK right now the main indicator and predictor of wealth is whether or not you own property. The game is rigged.

  2. Even though I am a Hackney resident for not more than 5 years, I was also able to note a considerable increase tacking into account the short period. The property I have is said to have its value risen almost one and a half times, according the letting agent I contacted.

    The thing is that many foreign investors help for creating/keeping the bubble, paying over the odds.

    I think at this point it is impossible to create a flow of properties for sale. People are not interested in selling because of the expectations – prices will keep rocketing.

    This is another reason why I think there will be enough supply of rental properties. I am sure there are many landlords, and letting agencies of course, looking to get as much properties as possible. I would guess that owner-occupiers’ number is quite low.

    Scot Parker
    E8, London, UK

  3. Dear Anon, I don’t share your faith that Govt would enact your idea if tenants groups backed it. Ministers have very little appetite to hear the demands of tenants in our experience. When the DCLG did their recent enquiry into private renting, they didn’t even invite any tenants groups to speak.

  4. I am shocked at the prices in Hackney, they have risen quite fast in Hackney. I rang up a Hackney letting agent and he suggested my property was worth £x, but because there is n’t much out there he said sellers can try for more.

    If you want to stop a bubble, encourage buyers not to pay over the odds. Even though I am a Landlord, I do share fundamental concerns. (I don’t agree with all your points)

    One solution is to increase the supply for properties available for sale. In other words create a ‘seller’s market’. There may be some Landlords, who might be interested in selling. At the moment the Capital Gain Tax, it is a disincentive to sell. It is not only the tax, but letting agent fees of £4,000 and solicitor costs, mortgage costs to pay when the property is on sale and it will need a refurbishment.

    In Germany, if someone owns a property over 10 years, they can sell it tax free. So it discourages quick speculation, but encourages people to sell up.

    Landlord’s can’t ask for this tax break, because people within your group will say it is a tax break for landlords etc… . However, if tenant groups like you saw merit in my idea, the government may consider it.

    Although, be warned, it might reduce the supply of rental properties…. because those properties will end up in the hands of owner-occupiers.

    • ‘Squatters said I was dead’
      Julia High, the landlord in the story referred to, lied about living in the house that was squatted, in order to get the police to evict without court process (since squatting a lived-in house was an arrestable offence even then).
      Many of the scare stories in the Evening Standard in the run-up to the moral panic and eventual criminalisation of squatting were just lies that angry owners of empty homes had told the paper, the police and even, once their MP.
      Had they not been lies, the squatters would have been immediately evicted pretty unceremoniously and there would have been no story.

      Anyway, Ms. High, if you’ve got here by googling your name, I as the author will be very glad to identify myself should you wish to sue me for libel as I restate: Julia High lied to the police and the Evening Standard – she did not live in the house at the time.

  5. Not sure about tax breaks owen. Private landlords are taxed on rental income and on cap. gains.

    However : What we need is to recognise the bubble is inflated and find ways to let the air out gently.

    Maybe let house prices fall, over a decade or two at a rate equal to that at which mortgages are paid off. That way there’s on financial gain by those lucky enough to have a deposit and own a house, but people won’t go into negative equity, which must feel a bit worse than renting.

  6. Stop the tax breaks that buy-to-let landlords receive…why should their investment in houses be tax free when it deprives people of housing, whereas investment in productive capacity ie might actually create better jobs gets taxed?

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