Common sense on the housing market
More people than ever are devaluing Britain’s most popular, hallmark product — an overpriced home — by accepting discounted offers for their flats and houses. Brits should hold the line. Many will, thank goodness, but the ones who don’t undermine the country and London most of all. We must do our best to prevent market democracy discovering the proper value of our homes.
There are already big problems at the top end of the London housing market. Hundreds of luxury homes, often complete with swimming pool, gym, and cinema, are lying empty. Hikes in Stamp Duty, uncertainty over Brexit, and the recent spotlight shone on tax havens and money laundering may be putting off buyers. Oh well.
The property slowdown is not a national rout — yet — but prices are “moving South” which means “bad” in the lingo of the City of London and, to be fair, many parts of Northern England.
Prices have been “going North” in the South and parts of the country within a 150 mile radius of jobs (in the South) that pay well for years. You can call this Tory political economy if you want. Whatever it is, it’s all we have to replace sensible regional planning. Get on yer bike and go to London if you want a house in Peterborough. This is the rigour of the market system taken for granted by politicians who have failed for 50 years to do anything about London’s favoured status.
Another finance sector phrase for declining prices is “going soft” which sounds like Northern contempt for someone showing signs of Southernness, evidence that the North-South thing is the template for our culture wars including Brexit.
But back to flats and houses: back to dim shared hallways in converted houses where junkmail piles up; or office-block conversions in Croydon; or executive fantasy homes built near the M25 for 3 car families and their dogs and ponies; or metroland semis next to the North Circular where dementia is settling in; or tough little houses off the A13 where two bedrooms are magicked into four with crafty partitioning; or housing association blocks squeezed onto sites alongside railways; or ex-industrial spaces subdivided into windowless bedsits; or back-of-shop storage converted into micro-houses by enterprising landlords; or beds-in-sheds for migrants; or housing estates where subletting is so entrenched the local authority has long given up keeping track of the residents or the risks they are exposed to; or all the flats where the living room is a bedroom; or anything advertised as new and exciting by housebuilders in the Evening Standard property section. There really is a lot of rubbish housing in London. Yeah, it’s a World City but I mean third world.
Ludicrously high prices compel us to respect property although buildings decay rapidly (like expensive footballers). Property is a pain to maintain and most building materials used by the average builder are remarkably trashy and short-life. In many places across continental Europe and in Britain’s coastal towns, you see how little upkeep is done and the ruin that results.
Perhaps the Russian oligarchs and the Gulf oilygarchs are less keen to flock to a country where ex-Soviet spies get killed
It’s time to get real about the great bag of crap we call property. We should care less that London’s property market is fading and more about investing in a housing stock that’s generously accommodating, manageable and available.
The market is locked into a bizarre stalemate with sellers and developers refusing to cut and buyers not interested in current prices. Owners and developers who have rubbing their hands with glee at the prospect of flogging some must-have property for £[fill in number] million are refusing to accept any discounts. They’re not making any new land, so best to sit tight.
Well except that they are making new land, vertically speaking. Developers have 420 towers in pipeline despite as many as 15,000 high-end flats still on the market. In a report based on interviews with 684 developers across London, a market research company Molior said that sales of new homes in London fell by a fifth over the last three months of 2017.
Perhaps the Russian oligarchs and the Gulf oilygarchs are less keen to flock to a country where ex-Soviet spies get killed or poisoned and thousands of people protest the state visit of the Crown Prince of Saudi Arabia, calling him a warmonger.
So if foreign investors are not going to buy these properties, then who will? The answer certainly ain't the British. As one estate agent told The Guardian last year: ““We need ‘affordable’ one- or two-bedroom apartments priced at £500,000. We don’t need swimming pools and empty rooftop bars with no one living at home to buy drinks at them. There’s just way too many £1.5m-£2m-£3m flats that all look the same.” Affordable £500,000 flats? We’ll come back to that.
There are now signs that the “pain” at the top of the market is being felt further down. My mates in the estate agency “profession” are picking up reports of people knocking off 25% from the previously inflated prices of middle-to get a sale. At some point something will break the stalemate.
Britain can choose to build its way out of a housing crisis if it puts its mind and wallet to it
Or, of course, as interest rates to deal with inflation, the economy slows as trade with the EU gets hit by tariffs and customs stoppages, and as jobs go to the wall (or across the Channel), people may realise they have to sell and cut their prices. A property crash will probably not be far behind. Keep an eye out for the first developer of a new, sparkling high rise development to hit the skids and apply for bankruptcy.
Will this be a good thing for hoi polloi? Yes and no. Property crashes often come with recessions and there will be losers as homebuyers either hand in the keys or realise they will be stuck for some time in a flat with negative equity (for younger readers, that is when the mortgage debt is higher than the value of the property). But if there is a substantial re-set to the property market then that will bring some relief for young homebuyers currently priced out of the market. What isn’t needed is carpetbagging i.e big corporates to hoover up distressed properties with an eye to exerting monopoly pricing in the rented sector.
Here is an idea for a social entrepreneur — albeit one with some property-hungry money behind him or her. Send out a message to all the on-spec buyers from Asia and elsewhere who bought flats off plan with a cunning ruse to flip them but have now found there is no market. Offer them a decent exit and they’ll probably take it rather than have it on their books for year to come. And then split up or otherwise adapt the flats and convert them into genuinely affordable homes, preferably for rent. That should precipitate a run for the door for the remaining people in that block.
Of course it would be easier just to start building homes for rent at genuinely affordable rents bearing in mind the astonishing, and to our great housebuilders somewhat unpalatable fact that Council housing has paid for itself albeit over a 40 year period. That is do-able (and not just because it is in the Labour manifesto). It’s doable because we can print our own and issue our own debt. Yes, the UK has a lot of debt from the financial crisis but look where the ham-fisted attempts to pay it off have got us to: record street homelessness, an NHS crisis, and cuts to youth centres.
The point is that Britain can choose to build its way out of a housing crisis if it puts its mind and wallet to it. When the governments of the Victorian era wanted to ensure they maintained their domination of their dominions and trade flows, they funded the building of a navy the size of which the world had ever seen. Its admirals moved fast to adopt new naval technology with remarkable speed once it was shown to be practical and necessary.
Two hundred years on and Britain is faced with a more domestic problem, but one which makes our lives worse on a daily basis. Government after government has actively made the housing crisis worse. It is therefore government that needs to take action, rather than endlessly trying to outsource the problem to housebuilders, consultants, and housing associations. The decline in prices opens the door for HMG to so some old fashioned fiscal intervention.
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