HOW much is your house worth? More importantly, how much does it matter? The current cover of Private Eye perfectly captures this very British preoccupation: on one side David Cameron, warning Brexit might lead to war, and on the other George Osborne, who chips in: “Or worse, house prices might fall!”
One crucial detail tends to get lost in all the excitement about soaring property prices: the difference between houses and homes. My flat might have gained on-paper value over the last decade, but it’s also the place where I live, so unless I plan to move from it into a tent, or a camper van, or some other brick-free dwelling, I’m not likely to realise that “gain” any time soon. More likely, I’ll eventually move to another home – one whose value has similarly risen or fallen over the same period.
Even after the bubble burst, the message quickly returned that the only way is up
Yet people don’t tend to see it that way – and little wonder, when for so long price increases have been portrayed as a free-money boon for owner-occupiers, rather than those who have bought or inherited an extra flat or two. Even after the bubble burst, the message quickly returned that the only way is up – not just up out of a negative-equity dip, but up, up and away. Only more recently has attention started to shift to the plight of “generation rent”, unable to squirrel away a huge deposit or meet the rigid demands of cautious lenders. This week a think-tank raised the alarm about the growing gulf between wages and prices, noting the average property price has risen 14 per cent over the past five years while average earnings rose by just six per cent. For those who can only dream of a six per cent pay rise, the message is clear: nae chance.
As these young people resign themselves to a life of paying someone else’s mortgage, some say our nation just needs to chill out about property ownership. Why can’t we be more like the Germans, they say, and enjoy the freedom of renting? Well, for a few good reasons, actually. Renting is now more expensive than paying a mortgage in every part of the UK, with Scottish renters particularly badly stung. It’s soul-crushing enough to be throwing money down the drain, without the added knowledge that those paying for their own bricks and mortar have more disposable cash too. And German property prices were stable for decades, so those who rented weren’t watching their dreams of home ownership fade into the distance like an blown-away kite.
What’s happening is that families with assets are maintaining their privileged position while families with none are seeing their chances of acquiring any decrease
Of course, it isn’t actually true that an entire generation have been locked out of the market, or that some kind of “boomers vs millennials” war is being waged. What’s happening is that families with assets are maintaining their privileged position while families with none are seeing their chances of acquiring any decrease. Boomer parents are giving their millennial children deposits on a massive scale, with research published earlier this month suggesting as many as a quarter of all deposits for new mortgage this year will be funded by the so-called Bank of Mum and Dad.
Each parent who provides their offspring with this leg-up doubtless feels justified in doing so, regardless of how they feel about entrenched inequalities when it’s someone else who’s perpetuating them. The combination of static wages and soaring prices fundamentally undermines the idea that hard work and discipline are all it takes to get on in life. What asset-rich parent would be content to sit back and watch their child struggle to reach a moving savings target, like a hopeful kitten chasing a toy that’s forever just millimetres from its whiskers?
A helping hand is one thing, but if it becomes more of a guiding steer then young people will be denied the experience of finding their own way in life
The seemingly inexorable rise in prices adds a sense of urgency: why delay until tomorrow when you can buy today? In fact, why not spare junior that period of renting and saving altogether, and set them up with a starter flat rather than casting them adrift in the big bad world?
There’s a danger here of losing something of value that cannot be measured in pounds and pence. A helping hand is one thing, but if it becomes more of a guiding steer then young people will be denied the experience of finding their own way in life. It’s easy to romanticise the recent past, when students lived in grubby digs rather than sparkly new-build condominiums, but a moderate amount of struggle is character-building, and trying out different ways of living – sharing, compromising, economising – is an important part of early adulthood.
Brexit or not, house prices may well drop at some point, or simply level out, and if they do the sky won’t fall. Buy-to-let tycoons nearing retirement might not be happy, but a drop in prices and a rise in wages would give a young person with no access to family resources a fighting chance of one day owning their own place. And they aren’t the only ones who would benefit from a correction to the market – plenty of young buyers may be able to tap the lender of first resort for their deposits, but they still end up saddled with daunting mortgages. Lower prices all round would let them stand on their own two feet from the beginning. If their parents are still desperate to help out, they can do so the old-fashioned way, taking note of the fact that a proud new homeowner can never have too many wine glasses, throw cushions or luxury bath towels.
A version of this article first appeared in The National.