When asked to predict the results of a global epidemic, how many economists would have predicted that a boom in house values would occur? You would be hard-pressed to find any economists who could have predicted a house price boom. But that is exactly what has happened.
As Nationwide building society has revealed, the price of a typical UK home has just topped £250,000 for the first time.
It seems that there is no plague or pestilence, and no natural disaster or economic Armageddon that could shake the British love for home ownership.
The virus has thrown the economy into its worst slump for a hundred years — but house prices have risen by an average of more than £30,000.
As Nationwide building society has revealed, the price of a typical UK home has just topped £250,000 for the first time
This may seem like another example of how crazy Brits are to their Continental counterparts who are happy to rent.
I am a different person. The UK economy is anchored and supported by property ownership. We should celebrate this vibrant market.
Passing that £250,000 milestone is a mark of resilience and hope. It is also an important moment of British social history. This milestone marks the long post-war trend towards bringing home-ownership to all the people.
The national dream of owning our own domain, no matter how small, is deeply rooted in the national consciousness: property ownership is a sign of status, adulthood, and social responsibility.
I do not deny there are problems in this market. The first is affordability. Millennials are understandably upset by the way their parents seem to be the easy beneficiaries of rising house values, while they have been frozen out.
It is much more difficult to buy a home for the first time. Many people in expensive areas are trying to reach middle age before they can put down enough money. According to comparethemarket.com, their average age in London was 35. This number is expected to rise to 37 in the next ten year.
This generational divide causes real anger and distress. It is understandable. It was difficult enough when I bought my first South-West London apartment in the early 90s. My mortgage rate was 12 percent, leaving me with a small amount for all other bills.
It seems that there is no plague or pestilence, and no natural disaster or economic Armageddon that could shake the British love for home ownership. A supermarket shelf empty in March 2020 is the scene at the beginning of the coronavirus epidemic.
As the flat’s market value fell, I couldn’t sleep at night worrying. It bounced back, and it is now worth ten-times what I paid.
However, the rise in property prices means that many young homeowners are now able to benefit from the “Bank of Mum and Dad”, which if it were a financial institution would be ranked among the top ten mortgage lenders.
Eight out of ten parents support their adult children, contributing at least 25% of total funds to the housing market. Because they are homeowners, they can only afford this.
Another serious problem is the regional split.
You can easily buy a house in the North for well under the £250,000 average figure, but a detached property in London would set you back four times the sum.
Those disparities are harmful — they act as a brake on the mobility of labour which drags down the performance of the economy as a whole.
Problems like these are inevitable on small islands where the demand for housing is greater than the availability and where money and power tend to be concentrated in London. The solution is more housebuilding — but on brownfield land, rather than carpeting the countryside with semis.
Yet despite these difficulties — and I do not downplay them — property ownership happens to be the UK economy’s trump card, in much the same way as the raft of small and medium-sized family-owned businesses, known as the ‘Mittelstand’ and mostly able to withstand economic turbulence, is in Germany.
You can easily buy a house in the North for well under the £250,000 average figure, but a detached property in London would set you back four times the sum. Those disparities are harmful — they act as a brake on the mobility of labour which drags down the performance of the economy as a whole
A house is a source of wealth that can pass down through the generations and an engine of social mobility. Numerous families have borrowed against their houses to pay school fees or to fund other opportunities to propel their children into better careers and jobs.
My parents were part in the postwar boom in home-buying, which swept Britain from the 1960s through the 1980s. Estate builders such as the late Sir Lawrie Baratt built estates across Britain.
Mum and Dad bought a bungalow on Teesside for £3,000 in the late 1960s, which would now sell for around £160,000. While it is a fraction what it would have been in South-East, the price of the bungalow on Teesside for PS3,000 in the late 1960s was still quite a lot. It would now sell for around PS160,000.
Only 25% of Britons owned their first home in 1953, when Sir Lawrie built it. Today, almost two-thirds of us own our homes. It’s a good thing, too, as the property market is a vital economic driver.
We create work for estate agents, solicitors, mortgage brokers, and mortgage brokers when we move into our new homes. We also spend money on furniture, decorating, and gardening. We spent our money on our homes, instead of spending on holidays and nights out during the pandemic.
However, buying a house is not about just money. It’s a source of pride, and gives people a stake and incentive to contribute to their community.
Recognizing this was part of Mrs Thatcher’s genius. She accelerated homebuying by allowing people to buy their council houses and thereby freeing up the mortgage market which was previously inefficient and restrictive.
Cassandras will inform you that property is on the move for a fall.
Since the late 1980s, when borrowers were plunged in negative equity and lenders began mass repossessions, we have not seen a serious crash. Families that were desperate handed their keys back.
Economists predict that borrowing costs will rise as inflation is on the rise. Many who took cheap loans as a given will find this a difficult experience.
Lenders now require large deposits to protect borrowers from negative equity, unlike in 1980s when 100 percent mortgages were common.
There may be some pain ahead but the performance of the housing market in the pandemic has been quite remarkable — and just goes to prove that in the UK, when the going gets tough, the tough go house-hunting.