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This remains something of a draft. I don't know if I'll finish it. Amusingly, the amusing bits are far better than the serious bits. This is a shame, as I think I have a serious point, I just can't hold on to it for long enough that it is able to develop into a coherent argument.

If you are the sort of person that likes to burst in on dinner parties uninvited, you'll be aware that the topic of conversation is most likely to be that of house prices, and how wonderfully rich everyone is because of this. Of course, dinner parties are something of a middle-aged, middle-class sort of thing. The hip youngsters in their trendy neon bars selling generic imported beers to a soundtrack of electro-pain are probably talking about how miserable their lives are now, how they'll never afford a house of their own, and how they'll forever be in the thrall of a landlord living somewhere near Manchester.

Now, both of these situations are incredibly boring, so if you ever find yourself caught up in one it's wise to escape it as soon as possible. Bring up something embarrasing from your past, ideally involving someone else in the room. If that fails, you'll need to tailor your conversational gambit to your peers; for a dinner party, invoke sympathy by revealing that you only own the one house, and have remortgaged it to pay for your daughter's riding lessons. If young, stir up some envy, discuss the extension you're about to put onto your first house, and the evil schemes you'll employ to extract the maximum value from your town centre flat.

That said, there are issues within this property bubble that deeply affect society, and risk giving rise to a new class of landed overlords, put there through luck and circumstance, and not through their contribution to the health of the nation.

First time buyers on an average income cannot afford anything but the very worst homes. Worse even than those they could live in at council rents. Buy to let, combined with growing numbers of independent single professionals, is causing the lower end of the market to rise well above the reasonable price one would pay for such a house or flat, and at the same time enriching the perfectly well off readers of the Daily Mail.

Rents though, remain low, as buy to letters expect to make money on house price rises, and the large number of houses available to let means tenants can shop around. This probably forms the only benefit to those unable to buy a place of their own, at least they can still afford to live somewhere.

This is unlikely to persist, as rises slow, landlords must start to extract profit from their tenants, and may scrimp on repairs and safety work. Also the large number of inexperienced landlords each with a small number of holdings, means that it will be increasingly harder to regulate their properties to ensure their suitability for habitation.

The whole situation creates a new landlord class, who gather their income on the backs of their tenants who have no other way to find a place to live, so competition in markets can't rescue them from this cycle.

New developments are generally of very large, and thus expensive houses (makes more money per acre, so sensible), or of smaller housing which is either bound for housing trusts (so probably not the sort of place a young professional wants to live) or are held for sale at inflated prices until a landlord appears to rent it out. Bound housing is all very good if you're key worker like a teacher, or a nurse, but what of the thousands of other jobs which -- one supposes -- do some good for society through their existence. Charity workers, for instance, would probably not fit into the affordable housing bucket, and won't find the means to property otherwise. Again, this harms society. Low paying sectors which allow those committed to helping others can still live a comfortable life, with a secure future. Unobtainable housing leads the capable to dismiss a life of service in favour of accountency or the City.

Solutions? Perhaps it's time to make buy to let a less attractive proposition, and encourage people to invest their money in wealth generation rather than land values. This can be acheived through progressive taxes on buying or selling a second home, increase the rate of capital gains tax, or force landlords to operate their holdings as a company. Perhaps rental income needs to be taxed specifically, although it will be necessary to seperate housing associations and perhaps even companies from this. Another solution is simply a housing market crash, which will be painful, and potentially ruinous for those on the buy to let gravy train.

Maybe the right to buy needs to be extended to long term private tenants? At any time they should be allowed to purchase the house they can comfortably rent, but can't scrape a mortgage for, for a sizeable reduction on its market value. Although this might just cause tenanncies to become shorter as landlords shove people out so they cannot live in one place long enough to gain the chance to buy.

Banks are more willing to lend to buy to let prospects than to first time buyers, as they have more security for their loans. Are mortages performing their intended purpose, or are they now contributing to a housing problem? It will be hard to reform lending in this way, as this could also starve more useful investment in small businesses and hinder people releasing some of their capital to pay for emergencies, or simply allow for a comfortable retirement.

Increasing the available stock of property is also essential, new building continues, but not nearly fast enough to have any effect on the availability of property. The numbers of people in search of smaller properties is also on the increase, as people put off marraige and families, but still want a place to call their own. Perhaps it's time to embark on massive building schemes in those areas with excessive prices. Some extra supply in the market might go some way towards sorting things out. New building might not be the solution it seems, though. Many new developments are priced above the prevailing market, and rarely allow for the bargaining expected in a normal private property purchase. Builders are happy to wait for months, or even years, for properties to sell at the price they want, leaving them vacant in the meantime. This hinders the forces that could regulate prices.

Of course, merely breeding fear might be enough, with a large enough pool of people unable to buy property, and almost nobody able to afford the houses they live in at the moment, it seems unlikely that the property boom is going to last too much longer. Those in the buy to let sector may see this doom and gloom and get themselves out of the market slowly, taking their capital gains and investing them elsewhere, and also letting the market decline a little over the next year or two, without hurting anyone too much.

 ^Back to Top^ | ©Alex Gough Mon Mar 14 2005 ...more than you might imagine.