Tuesday, 28 April 2015

Moneyweek on top form

John Stepek nails it here, summing up Labour's latest bright idea, rent controls, and the government's (of whatever hue) attitude to house (land) prices generally:

But while it might be economic stupidity, it’s pretty smart politics – which sadly sums up the general tone of this election campaign nicely.

We all know that housing – specifically, house prices – is one of the most important issues to the British electorate. That’s why politicians like to make sure that they keep on rising.

If your average British homeowner sees that the price of their property is going up, then all must be well with the economy, and therefore they should vote for whoever is in power. That’s the simplistic – but I suspect, highly accurate – political calculus involved.

But there’s a twist this time around. Prices have been going up for so long that an ever-increasing group of people is feeling somewhat disenfranchised. In 2005, 70% of people owned their own homes. This year it’s down to less than 65%.

Those left at the foot of the ladder still aspire to own property. They still dream of the day when they too will benefit from an unearned, tax-free windfall resulting from a leveraged bet on house prices, as is every hardworking British family’s birthright.

Trouble is, they can’t see how they’ll ever get on to that ladder. And it’s clear that their parents are worried too. Apparently, 80% of the public believes Britain faces a housing crisis, says Mori.


Mark Wadsworth said...

The 70% down to 65% is not the relevant fact.

The point is that under-35s are down from two-thirds owner-occupiers to one-third. Given that few will ever make it 'onto the ladder' after that, in the long run we'll be down to one-third owner-occupiers long-run. And sooner or later there will be no Bank of Mum & Dad any more either, that's a one-off.

Rich Tee said...

It will have to change at some point, I am convinced of it.

If you increase the proportion of renters in a society then tenants will exert political pressure at some point.

The only reason they have got away with it so far is that people still think it is a temporary situation that will be "self-correcting" (it won't).

Bayard said...

"in the long run we'll be down to one-third owner-occupiers long-run"

What proportion of people do you reckon would want to be homeowners, even if their house was a depreciating asset or they had to pay LVT? That, IMHO is the "correct" proportion of owner-occupiers.


Nothing is going to change until the magic money tree dies and houses start drifting down in value and keep going for a long period of time. Then people will be renting by choice, instead of most tenants being wannabe homeowners.

Mark Wadsworth said...

B, the answer to your question is "about three quarters", we know that for a fact (from 20th century UK).
Everybody has to live somewhere.
Nobody has to be a landlord.
Owning will always be slightly cheaper than renting.
So there's your answer.

Bayard said...

"B, the answer to your question is "about three quarters"

I have a feeling that it is lower than that. The C20th was a century of rising land prices, which make owning more attractive than renting from a financial point of view. From my, admittedly narrow, experience, my grandparents' and parents' generations preferred to rent, not wanting the responsibility of owning (and thus having to look after) a house. Both my grandfathers rented all their working lives, despite being well able to afford to buy. One grandfather inherited a house of his parents and promptly sold it. My working class next-door neighbours in London had bought a house when they married, but had later sold it to a housing association because they couldn't afford to repair it and didn't want the worry.

I shall have to do some research into house tenure amoungst the middle classes during the end of the C19th and start of the C20th: people who could well afford to buy and maintain houses and so for whom renting would have been a matter of choice not necessity.

Mark Wadsworth said...

B, let's not argue about the precise number.

My points are that everybody *has* to live somewhere and nobody *has* to be a landlord.

Bayard said...

Of course no-one has to be a landlord, but if some people prefer to rent, then there will be a demand for landlords which will generate a supply. No-one has to be an accountant either, but lots of people would get very frustrated if they had to sort out their own financial affairs.

Mark Wadsworth said...

B, yes, of course a small number of people at any one time will prefer to rent.

Random said...

"foot of the ladder"
I am sure many were at the foot at Bernie Madoff's ponzi schemes. But this is on a massive scale.