Just over two years ago my wife and I bought our first home. We did so in a buyers market, as the opening phase of the pandemic frightened landlords into selling property they worried would remain empty. Faced with looming uncertainty, other sellers, too, favoured a quick deal over a fair price. It wasn’t to last.
While we were approved for a mortgage before Covid hit, we made an offer on a house just as its consequences came into focus. We got a bargain from a seller keen to clinch a deal before the crisis unfolded. Because of changes by the government that July (a month before we completed), we didn’t pay any stamp duty, saving us thousands. Then, early the following year, as the third lockdown kicked in, we were granted a mortgage holiday. Like millions of other homeowners, we felt it made sense to defer any payments given the potential risks ahead. In the end, nothing dramatic happened, so we saved half the cash and put the rest toward decorating our front room. There was no payment holiday for my friends and colleagues who rent.
It should come as no surprise that throughout that period – and even now – I felt a combination of relief and guilt. We bought a place because of luck and yet only seemed to be further rewarded for that initial good fortune. Meanwhile, friends who rented, and who worked just as hard (or harder), endured rising costs and insecure tenancies. Forget opening up about my feelings (though that’s useful too), leaving behind the world of landlords and letting agents was a better antidepressant than any pharmacist could dispense.
Yet this was just the start. In the two years since we bought it, our home has, according to property website Zoopla, gained more in value than I’ve earned working. So when I read recent reports of a possible crash wiping 15% off house prices my instinctive thought was, “we’d still be well up on two years ago”. While that would not be the case for someone who has just purchased a home and who might fall, however briefly, into negative equity, it is still a strong case against falling house prices being viewed as analogous to a national crisis. And anyway, I’d still rather be in negative equity, paying towards an asset every month, than giving away half my earnings to a landlord. Any sensible person would.
The truth is, if you are a homeowner, you are extraordinarily fortunate. The entire system, particularly over the last 15 years, has been rigged in your favour. Since buying a home I have found it increasingly astonishing when older, prosperous homeowners accuse those who rent of being feckless or lacking a work ethic. For some, such sneering presumably serves to mask the occasional twinge of guilt. It must do because, when it comes to housing, there’s no doubt young people today have it much harder than their parents.
While derisive views that seek to blame young people for their own misfortune seem ubiquitous in the media, they are in fact unrepresentative. Indeed, according to YouGov, 52% of the public agree that falling house prices would be good for the country (just 4% believe the contrary). Among those aged 25 to 49, the backbone of the working population, that figure rises to 56%. So while newspapers and the BBC invariably report rising house prices as an undiluted good, and rightwing pundits blame individuals for being unable to buy, the public is aware the opposite is true. That is because they are themselves victims of a dysfunctional rental market, or know someone who is. Or simply because, in good conscience, they recognise that the present situation is abhorrent. In 1997 the average property was 4.5 times the average salary. Today it is over nine times. To any reasonable person that is patently unfair.
What’s more, when you look at the specifics of falling house prices, you see the supposed ‘chaos’ we’d face is overstated. After all, a 10% fall next year – as was recently touted by Credit Suisse – would only mean a return to prices last seen in August 2021. Realistically it is precisely a decline of this sort which is needed, with any rises then proceeding to lag behind wage increases for a decade or two.
Yet rather than embrace a gentle correction, both major political parties insist on the old orthodoxy of pumping the market so property values continue to soar. For the Tories that’s the point of cutting stamp duty once again, a policy announced during the ‘mini budget’. Elsewhere 50-year mortgage products are intended to prop up demand. Labour, meanwhile, announced a “mortgage guarantee scheme” at their recent conference, with the intention of pushing home ownership from 65% to 70% of the population (where it was in 2003). Yet that too would have an inflationary impact on prices. For all their purported differences elsewhere, both Labour and the Conservatives seemingly want runaway house prices to persist.
Here’s what they won’t say. Letting property prices fall, ideally in a managed way, is a necessary part of addressing the housing crisis. It should happen alongside the expansion of private housing supply, improving renters’ rights and building millions of new council homes. Doing all three of these things would make a major dent in today’s over-inflated prices – probably to an extent we can’t fully calculate and well beyond whatever we’ll see in the next twelve months. If, as a consequence, people like myself lose out on wealth we never worked for, then, so be it. Indeed it should be celebrated. People only get one life – they deserve good homes while they live it.
Aaron Bastani is a Novara Media contributing editor and co-founder.