On Saturday 26 May the Money Guardian included an article on house price inflation over the sixty years since the Queen came to the throne (under the title ‘Worth their weight in diamonds’). It pointed out for example that a terraced house in Chelsea that sold for £4,600 in 1952 is now ‘worth’ £3,500,000. Similar examples were given for other types of property such as a three bedroomed detached in Guildford sold in 1952 for £5,544 and now on the market for £768,000. ‘…in London it’s £16 a day profit over the 60-year period.’
These changes cannot be laid at the Queen’s portals. The greater part of the asset inflation has occurred since Mrs Thatcher’s deregulations of the finance sector during the 1980s. This released a flood of mortgage lending that by one estimate produced £800billion more housing debt outstanding over the period 1980-2005 than would have been the case had lending risen with other economic indicators such as general process and earnings.
The article was remarkably uncritical. There was not a mention of the widespread unaffordability in both prices and rents that this price inflation has occasioned and of the labour recruitment and retention problems it has caused in high housing cost areas. Nor of the regressive effects on wealth inequalities when 70% have access to asset accumulation via property and 30% do not. Nor of the land price instabilities generated by recurrent house price ‘spikes’.
Nor was there any discussion of the lending practices that increasingly took second household incomes into account and landed millions of families into greater dependence on paid childcare, life/work juggling and on the displacement up one generation to grandparents of financial and care pressures. Nor of the Unicef reports that have found children in the UK get a worse deal than those of almost any other EU country. Any connections here?
Nor any mention of the sub-prime lending and the encouragement of over-statement of incomes on loan applications that have led to unparalleled levels of bad debts, bank crises, £1trillion+ bail-outs and ultimately the crisis in public finances for which the poor are now suffering disproportionately. Nor any consideration of the huge opportunity costs of applying the £800billlion to inflating house prices when the economy desperately needed investment in growth activities and infrastructure over that period.
Had mortgage lending moved up over those twenty five years in line with general inflation average house prices would now be in the order of £60,000, not £160,000, with regional variations. How much simpler life would be.
Peter Ambrose, Visiting Professor in Housing and Health – University of Brighton