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….
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.
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?