Monday, May 26, 2008
Link: 'Cornwall best-performing seaside town for house price rise' - Telegraph.
Britain has many problems, but the least explicable for me is the national obsession with house prices. The linked article is, when you think about it, really rather disgusting. Shelter is a basic human need, yet according to the Daily Telegraph the "best performing towns" are those in which shelter is being priced beyond peoples' reach at the rate of 24% and 22% a year.
When I asked my bank manager for a mortgage to buy my present humble base in Britain, he laughed at me. "We would lend you 8 times that" he told me. I remarked that, if he did, I would have no life. He said that, if that were so, most Britons with mortgages have no life. With that, I have to agree.
I simply don't understand why our quality of life is better if the price of apples or petrol falls, but worse if the same happens to houses. If my house (now paid for) were to fall in price, it would do me no harm. Similar houses would be available for what it would fetch. In fact my family would be better off. My children would have a better chance of a decent home without being driven by the need to service massive debts. They would have more cash available from their earnings for real investment. If they wanted to take the risks involved in starting their own businesses they could do it without being burdened by housing debt.
I am waiting for the penny to drop. Now that the value of ordinary houses puts people above the inheritance tax threshhold, surely they will realise that borrowing huge amounts of money to buy such houses (and paying back many times more than that, when interest is counted) is simply another way of giving money to the Government? My modest modern mid-terrace is perfectly comfortable and full of art, beautiful furniture and gadgets. There is a beautiful car in the tiny single garage (which I have to fold back the mirrors to slot in with millimetres to spare). My family have enjoyed holidays in fascinating places and we drink fine wine and eat superb food. My wife and I are making sensible provision for our old age. All of these things give more pleasure and more security (for all that - apart from the art and the pension fund- they are consumables) than sweating and straining to fill government coffers with 45% of the value of something that merely keeps the rain off our heads.
Grow up Britain! That house that is your pride and joy is the merely the shackle on the end of a chain that leads to the Treasury. Divide it into modest flats and sell the spare one(s) off. Buy art, fine wines or a Ferrari. Get yourselves a Patek Philippe or a Breguet. Travel the world or give it all to charity if you like. Whatever you do, for goodness sake, live a little before it's too late.
"although that would be horrible for those who have bought in recent years"
Why? Unless they were planning to sell quickly and buy gold, I don't see much of an issue.
Posted by: mark | Tuesday, May 27, 2008 at 02:55 AM
I know that there has been a correction in the house prices in the UK over the past year or so, but previously they were, I think, escalating dramatically as they are here in Vancouver where the average house in the city has doubled in price in the past five years. Modest sixty year old houses, on ordinary suburban sized lots, are currently selling for $1.8 million dollars and are considered knockdowns. I don't think the house has to be one's pride and joy to saddle one with a crippling debt. Children are now living in houses which are of a much lower standard than the ones they were brought up in and this was not the case in the previous generation. The supply of housing is just not keeping up with the demand and I assume the same was true in the UK until the last year.
In a way I would hope that a correction would take place for the sake of the young people, although that would be horrible for those who have bought in recent years. I remember well the correction of the early eighties when housing prices dropped dramatically because people were unable to refinance their mortgages at the high interest rates in those inflationary times. It was a heartbreaking time for many who lost their houses, even still owing money. Of course the current low mortgage interest rates are helping to keep the housing market high.
When we bought our first house 44 years ago the banks were trying to do the the same thing, say you qualified for more. With your salary you can borrow X dollars. We used the formula of the time which said 2 1/2 times your salary for the cost of your house. Today, here, even with a salary of $100,000 which is well above average, that old house above costs 18 times one's income. Actually, there is no way one could afford it at all on that salary. Even on two salaries of that size. So who is buying these houses? It's all a mystery to me.
Posted by: JMB | Monday, May 26, 2008 at 09:10 AM
So very true.
If you recognize the prison that large debt chains you to, you will see when and where you become a slave or prostituted yourself to the housing ladder.
So Mr.Paine the modern "Age of reason" seen from a different prison.
Posted by: Peter Whale | Monday, May 26, 2008 at 09:09 AM