Bubbles are nice. Bubbles are fun. Bubbles are harmless. Kids love to blow them, chase them and see them disappear. Adults love to sinks into warm bathfuls of them.
There is no “housing bubble”, folks. What we have here is a toxic and growing housing crisis, red in tooth and claw, which is damaging the lives of many and will damage the lives of many more.
Earlier this month David Cameron claimed credit for the number of homes sold under his 'Help to Buy' scheme, which did no more than take us right back to the bad old days of 95 per cent mortgages. One does not have to delve into the mists of time to remember: only a few years ago these irresponsible loans resulted in our very own sub-prime crisis and its consequences. But today Tory deputy-chairman (and former Housing Minister) Grant Shapps can go on television and state that 95 per cent mortgages are “the traditional” loan and “have never caused problems in the past” - and no one blinks or laughs in his face.
It is, of course, no laughing matter. House prices are rising at twice the rate of price inflation and four times the rate of wage inflation (unless you're a banker or an MP) and expected to continue to rise at 4 - 8 per cent in 2014 and beyond. Private rents inevitably follow, as 'Buy to Let' investors need to cover their rising costs and in any event will always charge whatever they can. More and more people can afford neither to buy nor rent.
Politicians have but a broken record to justify their position. “We must build more homes”, they all say. “We WILL build more homes”, some promise. Problem is, speeches don't build houses and neither do politicians. Developers do, and public service is not in their vocabulary. So in London 70 per cent of the tens of thousands new homes currently planned are aimed at foreign buyers and offered at very foreign prices, which are over twice as high as in the existing neighbourhoods.
Where, then, will the next generation of Londoners live? Those struggling now - young working professionals - are almost too embarrassed to talk about it. Today's teenagers don't count: by the time they realise how bad things are there be a different Mayor and a different government who will happily condemn and blame their predecessors in time-honoured fashion and carry on their failed policies.
The usual suspects will continue offering false panaceas. Restricting sales to foreign buyers would be illegal, rent controls will kill off the rented sector as it did before. Building more would help, but developers will not risk their fat margins just because well-padded politicians tell them to. Building council housing would be very helpful - but nobody really wants to pay for them, least of all Mr Shapps and his backwoodsmen backers.
So for the time being we have a distorted market inflated by cynically wrong-headed Help to Buy Votes policies. This is not a bubble, it's big trouble.Reuse content