here we go again
A decidedly pokey three-bed semi with a kitchen extension (and some original features dontchaknow) about a hundred yards from me, has just gone on the market for a whisker under a cool seven hundred grand. Two semi-derelict cottage-style houses over the road recently sold for over £650,000 each. And I kid you not, one has been taken back to its four bare walls, without its roof, and the buyer must be spending at least another quarter of a million to make it habitable. As I sit here I can hear the whine of the industrial wood saw and the rumble of his concrete mixer but, for all intents and purposes, it may as well be Whitesnake’s paean to unrequited love ‘Here I Go Again’ that I could be listening to.
Despite all the heated post-financial-crash discussion concerning the necessary restrictions and curbs on excessive property lending it appears we’re all too keen to follow the same well-trodden, casualty littered, path. Thankfully, Northern Rock’s infamous 125% mortgages are yet to make an appearance but with 95% ones, stretched over 35 years, now a regular feature, it can only be a matter of time. Another buy-to-let, sir? That’ll be only a 15% deposit thank you very much. Five times earnings multiple? Oh, go on then. Ah yes, the Bank of England’s new ‘affordability’ control? Well, tell us you’re going to cancel your monthly gym subscription and that’ll make everything fine & dandy.
Somewhat reassuringly there is somewhere, not a million miles away, that appears to have learned the lesson and the error of our previous ways. Look over the Irish Sea to the Republic of Ireland and you see a whole different kettle of fish with regards to mortgage controls. Having felt the worst of the collapse of the ‘Celtic tiger property boom’ where whole housing estates remain unfinished, or on the face of it, appear finished but without either service provision, or people to live in them, they appear a tad reticent to follow our lead. Deposit levels of 20% minimum and 3.5 times your income, or don’t even think about asking.
Mark Carney and George Osborne may call this manner of control, crude and simplistic, but do you know what, it works. And it works exactly because it is crude and simplistic and we all understand it. We all know that spending rises to meet income and, by the same token, house prices are a function of how much banks are willing to lend. Severely restricting this lending can only help bring property prices down, which, in the long-term will be to the benefit of almost everyone, apart from the buy-to-let investor and off-shore speculator. An interesting statistic came out of a survey this week where seven out of ten respondents admitted that they put housing policy ie interest/lending rates, on a par with the NHS when choosing who to vote for. Housing political? Well, who’d a’ thunked it.
