Mutterings of a Fool

Man, Dad, Runner, Chief dog walker

An obsession with house buying?

Please note that I write this as someone who built up significant student debt, who has had a credit card balance for as long as I can remember and who bought their first house 2 years ago without any loan from the bank of mum and dad. I consider myself fortunate to get a graduate job with a good company and have managed to work hard and get a couple of promotions, but rich I am not, however one day Rodney….

For Sale

Image by Ian Muttoo via Flickr

It seems that as a nation we are obsessed with owning a house and I put myself in that category too, but even so I think it’s a little unhealthy. Why is it so important to be the king of our own castle? In Europe for example the level of home ownership is much lower (42% in Germany and 49% in the Netherlands) compared to 70% in the UK. Do we really need to own our home to be happy? Should it almost be a basic right to own one? Or is it perhaps a good thing that not everyone can afford to buy?

It certainly seems like the government thinks so with their latest announcement to try to stimulate the economy. They plan to inject £400m into the housing market by guaranteeing mortgages for first time buyers. I understand the intention behind this incentive, by allowing first time buyers to get onto the housing ladder they are creating movement in the housing market and generating growth in the economy as a whole (moving companies, estate agents, solicitors, surveyors, banks all benefit).  This scheme will allow people to borrow 95% of their home value, which is a mind boggling idea considering that this is precisely what caused all the problems in the credit crunch and has now left people in negative equity in many cases.

There is of course also the continued efforts to create affordable housing in villages in particular, this I whole heartedly agree with as small communities are really important and it’s wrong that young people have to move away because they can’t afford to live where they grew up. But part of me also wonders if this is the right strategy, part of the issue is second home ownership of course, so why not tax 2nd homes more? This taxes those people who earn the most and should create less incentive to own a 2nd home. Otherwise all you are doing is allowing already well off property developers to get richer, just from a new and profitable revenue stream.

DAVOS/SWITZERLAND, 29JAN10 - David Cameron, Le...

David Cameron said today that the average first time buyer who doesn’t get help from a parent is 37 and that this is ‘wrong’. Um, why? Just because they haven’t bought doesn’t mean they are homeless or living in squalor does it? They could very well be living in a very pleasant and nice rented house in an area that they will never be able to buy in. But perhaps this is ok? If someone can’t afford to borrow the money or raise the deposit then should they be able to get a mortgage by the government interfering? Are the levels of personal debt in this country not already high enough with people struggling to pay their bills?  I own a house, but I saved the deposit by moving home with my wife for 6 months and living with the in laws, we saved as much as we could and eventually sold our car to get enough and drove a £500 Peugeot 306 instead.  Part of me thinks that the X-factor society want everything now, without having to work hard for it.

So would this £400m not be better spent for example creating more rental properties in locations near to where people have to work so they don’t need to commute for hours? Would this not help the family values that the Tories talk about so much? Or use the money to give house builders a tax break for redeveloping sites rather than the inevitable creating of new housing estates on the outskirts of towns?

Am I way off? What’s your experience of buying a house?

5 Comments

  1. This one really pisses me off I have to say. Owning a home is not a right. Although I think many homes are very overpriced – new ones especially, I think you should only be able to get what you can afford. If you can’t afford something, you shouldn’t get it on a special offer while the rest of us have to pay full price.

    As you say, crazy mortgages are what got us all into this mess in the first place. So to introduce these again, for people who can’t afford a deposit, just seems lunacy! Chances are they will struggle with their repayments, then it’s the tax payer that picks up the bill. If they default will they lose their house like the rest of us?

    On the flip-side, I think renting is bad too. You are essentially paying someone else’s mortgage and getting nothing long term – no investment of any kind. Some rents I have seen are easily what a mortgage for the house would cost, so it seems like a false economy to me. Why pay someone else’s when you can pay for your own mortgage?

    But that’s my opinion in general. Everyone needs a bit of help every now and then and that’s great, but not everyone can have what they want, so why should some be given it and others not?

    • I actually think we’re wrong with the renting is bad argument, it’s just like leasing a car, you make a decision that you don’t want the risk of having to pay for maintenance etc. So you decide to pay for a service rather than own.

      • Well… yes and no. I agree the maintenance issue is something a lot of people worry about. We used to lease our cars, then realised we were shelling out a lot of money every month for something we’d never get to keep. So we’d continue to shell out the money until we handed the car back, then we’d get another one, probably costing a little more than the last one, and still have nothing to show for it at the end of the 3 years.

        Same with a house in my opinion – when you retire, chances are you won’t be able to afford the crazy rental prices, but you’d most likely have paid off your mortgage by then….

  2. gosh – that photo of David Cameron is so slap-able.
    As I understand it a lot of European’s rent rather than buy. Perhaps their rents are more reasonable. I think the housing market here has gone crazy – mostly due to greed, property booms serve no one except a smug few. I remember the last property bust and that was a disaster all round – mostly people being encouraged to take mortgages they couldn’t afford and then hey presto a massive interest rate hike.
    I think it’s wrong that in rural communities people are priced out of the market by second homers.
    There are an awful lot of properties in the UK empty – I think these should be developed and the communities they are in developed before we carry on new building.
    I think the Government like us in debt – it makes us work harder. thats my 2p’s worth anyway.

    • Totally agree on the empty properties, surely better for the government to spend money getting them back on the market rather than just giving us cheaper/bigger mortgages.
      Even with a 95% mortgage most people couldn’t afford to buy in many rural communities, just seems the wrong way to spend the money. And don’t get me started on the whole right to buy scheme…

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