RUTH SUNDERLAND: House price boom is proof of a very British miracle

RUTH SUNDERLAND: House price boom is proof of a very British miracle

How many economists, when asked to predict the consequences of a global pandemic, would have predicted a house price boom? Precious few, if any, you would have thought. Yet that is precisely 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.

There is no pestilence or plague, it seems, no economic Armageddon or natural disaster capable of shaking the British love of 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 

To our Continental cousins, who are content to rent, this probably looks like just another example of how bonkers we Brits really are.

I take a different view. Property ownership is the anchor and backbone of the UK economy, and we should celebrate the fact the market is in vibrant health.

Passing that £250,000 milestone is a mark of resilience and hope. It is also an important moment in British social history, a landmark on the long post-war trend of bringing home-ownership to the masses.

The dream of possessing our own domain, however modest, has become etched into the national psyche: property ownership is a mark of status, adulthood and social responsibility.

I am not, of course, denying that there are problems in the market. The first, clearly, is affordability. Millennials understandably fume about the way their parents have been seemingly effortless beneficiaries of rising house prices, while they have been frozen out.

It is so much harder for first-time buyers now, and in expensive areas many are nudging middle-age before they can rustle up a sufficient deposit. Their average age in London is 35 according to comparethemarket.com and that is forecast to rise to 37 over the next ten years.

This generational divide causes genuine anger and distress. And I can understand why. I found it difficult enough when I bought my first flat in South-West London in the early 1990s. My mortgage rate was 12 per cent, leaving me with an alarmingly small sum for all my other bills.

There is no pestilence or plague, it seems, no economic Armageddon or natural disaster capable of shaking the British love of home ownership. An empty supermarket shelf is seen above in March 2020 at the start of the coronavirus pandemic

I couldn’t sleep with worry as the flat’s value then fell. But it bounced back and is now worth ten times what I paid.

But that increase in property prices does mean that many young aspiring homeowners today benefit from the ‘Bank of Mum and Dad’, which if it were an actual financial institution would rank in the top ten mortgage lenders.

More than eight out of ten parents help their adult children, providing at least a quarter of the total funds flowing into the housing market. And they can only afford to do this because they are homeowners themselves.

A second serious problem is the regional divide.

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.

On a small island, where the demand for houses exceeds availability, and where money and power are concentrated in London, problems such as these are inevitable. 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 store of wealth that can be passed down the generations, and crucially an engine of social mobility. Countless families have borrowed against their properties to pay for school fees or other ways to propel their children into better jobs and professions.

My parents were part of the post-war home-buying boom that swept Britain from the 1960s through to the 1980s, when entrepreneurs such as the late Sir Lawrie Barratt built estates across the country.

Mum and Dad bought a bungalow on Teesside for £3,000 in the late 1960s, which would now sell for around £160,000. Yes, that’s a fraction of what it would be in the South-East, but still a sum of which their parents or grandparents could never have conceived.

Back in 1953, when Sir Lawrie built his first house, only a quarter of Britons were owner-occupiers. Now two-thirds of us are. A good thing too, because the property market is a vital driver of the economy.

When we move home we not only create work for solicitors, mortgage brokers and estate agents, we also spend on new furniture, decorating and gardening. During the pandemic, unable to splurge on holidays or nights out, we lavished cash on our homes instead.

Buying a home is about more than just money, though. It is a source of pride and gives people a stake in society and an incentive to play their part in their community.

Part of Mrs Thatcher’s genius was her recognition of this. She turbo-charged homebuying, by enabling people to purchase their council houses and freeing up the mortgage market, which previously had been grossly inefficient and restrictive.

Cassandras will chime in at this point that property is riding for a fall.

We have not seen a serious crash since the late 1980s, when borrowers were plunged into negative equity, lenders embarked on mass repossessions and despairing families handed back their keys.

Today, with inflation on the march, economists expect borrowing costs to rise. That will be a painful experience for many, who have taken cheap loans for granted.

But unlike in the 1980s when 100 per cent mortgages were common, lenders now insist on large deposits, which should help protect borrowers from the spectre of negative equity.

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.

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