Paying the price for inflating property

No wonder a house price fall can cause such alarm when Britain has so much economic, political and cultural capital tied up in paper assets.

Mick Hume

Mick Hume
Columnist

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Topics Politics UK

Many experts and ordinary mortgage payers seem to be rushing around like headless estate agents, asking how bad the price falls in the UK property market will get and how far it will drag us all down. Others are asking whether falling house prices might be a good thing that could teach us all a lesson about the evils of our spendthrift living-on-the-never-never ways.

A bigger question might be: why have property prices come to matter so much? For years, we have been told that the booming house market is the motor behind Britain’s prosperity. Now we are warned that falling property prices will send us down the road to recession. How could fluctuations in the paper prices of our homes – money that few of us would ever actually see – have such an impact on the wellbeing of society? What does it say about our economy, culture and politics that property should have become such a consuming obsession?

Harold Wilson suggested that a week is a long time in politics. It seems a lot longer in the panicky property market just now (which has largely taken over from politics as the focus of public debate). Forecasts of how far property prices might fall have been rocketing upwards almost daily, like the price of a penthouse flat at the peak of the boom. Will they slump by 10 per cent, 25 per cent, even 40 per cent? As this auction of uncertainty continues, it is worth recalling that these forecasters are the same experts who either confidently predicted an imminent fall in prices every month for the past three years (so were bound to be right some time), or else bought into the delusion that, in the words of one celebrity star of TV property porn, ‘property prices always go up’. (The latter category seemed to include many government advisers.)

It is hard to be certain where all this will end. There is clearly a property price correction going on, which should not be too surprising given that many house values have trebled in recent years. On one hand, the falls so far have generally been more of a dip than a crash (with regional differences), and there is no glut of forced sales and negative equity caused by unemployment, as there was in the early 1990s. Dramatic talk of the ‘worst price falls since the early 1990s’ simply illustrates that was the last time they fell. On the other hand, mortgage lending has definitely dried up in the credit crunch, and first-time buyers have all but disappeared. It is certainly not a good time to be stuck with expensively-bought buy-to-let flats in provincial towns and cities. But as yet, there seems little evidence to support the doom-laden assertions, so typical of our times, that this property price crisis is definitely worse than those of the 1990s or the 1970s. There is, however, enough evidence to suggest the danger of talking ourselves into a slump.

Few of us mortgage-payers or prospective home-owners can remain entirely immune to the obsessive concern with house prices and interest rates. But it is important to step back from the estate agent’s window, as anybody should before buying into an uncertain market, and try to consider the bigger picture.

Are we living in a housebound society? A Briton’s home may no longer really be his or her castle in the surveillance society. Such is our property obsession, however, that in recent years many have appeared to convert their home into their substitute pension, their personal passion and identity, or their pet green cause. The classical philosophical question — ‘How should a man live?’ — has been bulldozed and replaced by a new, much smaller one: ‘Where should we live, and how much can we make on it?’ With so much invested financially and emotionally in property, no wonder the prospect of falling house prices can fill many with such dread.

But at a broader social level, our obsession with property prices has exacted an even heavier price. Rather than debating how to produce new wealth in the real economy, much of the discussion about the UK economy in recent times has focused on how best to massage house prices and mortgage rates. The centrality of private house prices to the nation’s health symbolises the extent to which the UK’s prosperity has been built on speculation and financial chicanery financed through the massive extension of credit, rather than long-term investment in productive activity.

Yet so skewed have economic worldviews become that what happens in the ‘real economy’ can now seem less important than house prices. Thus one leading estate agent even suggested this week that the present housing crisis is worse than those of the Seventies and Nineties because ‘those were caused by high unemployment and high interest rates. This is more structural.’ According to this inverted logic, several million unemployed or interest rates in the high teens is less of a ‘structural’ problem than a relatively small fall in inflated house prices.

Debate and analysis about the future of the economy would surely benefit from a reduction in the inflated importance attached to property values. And that goes for political debate more widely. Often in recent years it has seemed that the big issue in British politics is no longer how to build the Good Society, but how to manage house prices and mortgage rates.

It was telling that two of the issues which marked the slump in Gordon Brown’s fortunes over the past year were the Northern Rock debacle – a product of the sub-prime mortgage crisis and the government’s desperation to keep the housing bubble afloat – and the row over how much inheritance tax your children might one day have to pay on the value of your home. Even as prices slide, New Labour has still been trying to invent new tricks to coax more first-time buyers into the market. It has no more vision to offer them than the prospect of an unaffordable mortgage on an over-priced flat.

Of course we are all concerned about our personal finances. Yet there is a bigger problem here. Property prices can be a dull enough subject for discussion in the pub or at the dinner table. But when they become the focus of big political and economic thinking, it is almost enough to make some of us lose the will to live and hand over the deeds to the inheritance tax-payers now.

There is a cultural price to pay, too, for Britain’s property obsessive disorder. It has suggested to many that aspiring to a better life, being a success, can be a passive spectator sport. All you had to do apparently was get a mortgage (or several), sit back and watch while prices hopefully kept on rising, like a lottery in which all with tickets win. Maybe they would go up far enough to fill the hole where our pensions ought to stand. Or even far enough for everybody to sell up and move to the middle of nowhere, as advertised in those myriad TV shows with names like ‘How to Run Away from Your Life’. The stars of the property makeover shows have competed with the body makeover experts to be the lifestyle gurus of the age.

And it is not just about cash. We have been encouraged to turn our property into the stuff of our humanity itself, to invest ourselves in it. An Ikea advert about how love can give your home ‘a soul’, broadcast at the peak of the boom last year, summed it up: ‘What do you put into it? Just money? Or your life and heart?’ Personally I think the mortgage is enough. Who wants a heart made of bricks and mortar?

None of this obsession has even addressed the real UK property crisis — the chronic shortage of decent housing that helped to fuel the boom in paper prices while construction fell farther behind need. True, building thousands more houses would have risked reducing our sacred prices. But it might help to construct a better society — and even mean that our children get somewhere to live, instead of hanging around at home supporting euthanasia campaigns and waiting to inherit tax-free. Instead, Britain’s already under-invested house-building industry has now ground to a halt as credit dries up. Now that is what I call a crisis, yet it barely merits a mention.

It’s little wonder that the downturn in property can have such an impact when our society has invested so much in it. The speculators in doom and gloom – a booming industry in the UK today – have been quick to exploit the mood to make matters worse. They are telling people that this is their deserved punishment for the modern sins of avarice, gluttony and pride – otherwise known as wanting somewhere decent to live and hoping to make a few bob.

All property is not theft (and contrary to the rumour, Karl Marx never suggested it was). Yes, an Englishman’s home may be his castle, but a castle can become a prison, too – if we allow the inflated obsession with property to restrict our view of economics, politics and the Good Society. That is too high a price to pay. Unlike the smug miserabilists, we should not ‘welcome’ a house price slump. But perhaps our worldview needs, as those property gurus might say, a healthy correction.

Mick Hume is editor-at-large of spiked.

Previously on spiked

James Heartfield exploded 15 myths about housing and rejected the government’s divisive housing policies. Dave Clements argued that Britain’s housing crisis was built on the the failure of the political imagination. James Woudhuysen said Gordon Brown is building on Blair’s small-minded approach to housing. Or read more at spiked issue Architecture and planning.

To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.

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Topics Politics UK

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