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Sunday, 13 January 2019

Gold Bricks & Mortar

I'm gonna lead with this from the County Press, from last month:

The article itself is here.

This is, of course, being pushed as a good thing - which is a perspective I'd like to challenge.

So let's say you are a homeowner. That's neat. Your home is worth more, now, than when you bought it - probably. Fantastic. Great investment! It just doesn't actually mean much, unless you want to sell - or leverage it against a loan.

Though, of course, if you end up buying another place - that increase in value of your own house is probably matched (on average) by the increase of the values of other people's houses. There's variations, obviously - but in the grand scheme of things, a slow and steady increase of home prices just means swapping all the bricks and mortar the same as always.

The banks make more money, of course. Charge the same interest rate on houses that are worth more, it's a no-brainer. Sure, they are leveraging a lot of capital out, but that can't possibly have any negative effect, can it?

Well, as long as nothing bad happens to trigger a large-scale failure of mortgage payments - but then, it's not like there's any probable financial crash on the horizon, is there?

Heaven forbid.

So what if you are one of the 20% of the country that rents? Like 13 million people?

Well, higher house values mean higher rents to pay. You may not experience an increase in your rent during your tenancy - but if you move out, damn sure the next people to move in will be charged more. Probably ahead of the inflation curve, too, which is about 2.3% right now.

What it does mean, though, is that 20% of the country is going to find it harder to actually stop renting.

Which is just fine for the people that OWN the houses.

Two years ago, the total mortgage bill paid - across the entire country, and keep in mind that the number of people paying mortgages is significantly larger than those renting - was almost £58 billion. In comparison, the total rent bill paid for the same period was almost £52 billion.

The fact of the matter is that a fifth of the population is seen as a resource to be tapped - a swathe of the population worth over fifty billion pounds, that it is best to keep in their lane, so they can keep paying.

It's not like rising rent prices is solely a house problem, either.

Speaking entirely personally, I've noticed a lot of places close in my own home town; and every time I have had a chance to speak to those involved, one of the significant (if not sole) factors is the increase in the rent of their property. If your high street is looking devoid, or that new place that seemed to be doing okay had to shut up shop at the end of a rental period, then it might not necessarily be because they aren't making sales.

Housing prices, then. As they grow, so does economic disparity. As they grow, so does the potential backlash of any kind of economic event. And it took precious little for the subprime crisis in 2007 to hole the economy of half the planet.

But hey, who's counting?

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