JOHN HUMPHRYS: It's time to stop following the flock on house prices

JOHN HUMPHRYS: As a dilapidated £800 shepherd’s hut sells for £16,000… It’s time to stop following the flock on house prices

As must-have properties go, there was not much to recommend it. Forget a designer kitchen or inglenook fireplace, this one had a leaky roof, walls covered in rot, a sheet of old plastic where the window should have been — oh, and wheels covered in rust.

But that didn’t stop a ferocious bidding war when it came up for sale at auction this week, and it was hard to know who to feel more sorry for: the shepherd who wanted to buy the old shepherd’s hut or the anonymous London businessman who outbid him.

He ended up paying £16,000 for what the auctioneers valued at £800. Hardly surprising given the state it was in.

Obviously it’s the shepherd who wins the sympathy vote but maybe we owe a small debt to the businessman. He provided a little more evidence for the old proverb that a fool and his money are soon parted. But he also made some of us reflect on what’s happening in the property market out there in the real world.

As must-have properties go, there was not much to recommend it. Forget a designer kitchen or inglenook fireplace, this one had a leaky roof, walls covered in rot, a sheet of old plastic where the window should have been — oh, and wheels covered in rust

That dilapidated hut cost five times as much as my first house: a new end of terrace with a detached garage and garden in a little village outside Cardiff. The average house in that same village today costs £300,000.

Yes, I do know about the effects of inflation, so let’s take a more realistic measure. Let’s compare incomes with house prices. In 1965, I was 22 and had just become a ‘thousand-a-year’ man. Twenty pounds a week. Riches indeed. So the house cost less than three times my annual salary. Perfectly affordable.

The equivalent of my young self today would have had to be earning in the region of £100,000 a year. Virtually inconceivable. And there is no sign of runaway house prices slowing down. Quite the opposite.

We learned this week that they have been rising at just under 11 per cent a year — the fastest rate for seven years. The average price of a home in Britain is now £243,000. That’s more than six times the average salary. Double that in London.

For those of us who own our own homes, and especially for the older ones who’ve paid off the mortgage, there’s bound to be a bit of hand-rubbing. But there’s also a sense of guilt.

In 1965, I was 22 and had just become a ‘thousand-a-year’ man. Twenty pounds a week. Riches indeed. So the house cost less than three times my annual salary. Perfectly affordable. The equivalent of my young self today would have had to be earning in the region of £100,000 a year. Virtually inconceivable. John Humphrys is pictured outside his cottage near Carmarthen, Wales in 2010

It’s gratifying to feel that bit richer without having to make any effort, but it means the young will have an even tougher job trying to afford a house. That’s where the guilt comes in.

It’s possible, of course, that many young people will struggle a bit to see what all the fuss is about. True, every new price increase pushes even further away the dream of home ownership but is that necessarily a bad thing?

They might even find it a bit strange that we, their parents and grandparents, have been obsessed with it for so long.

Home ownership has been central to the cultural, economic and political life of Britain for generations — so much so that we pride ourselves on being ‘a property-owning democracy’.

But there must surely come a point when house prices stop racing ahead of incomes.

It’s true that Covid has added a bit of oomph to the market in the past year. A bigger house with a decent garden seems even more appealing when it’s our prison as well as our home. Plus the money that might otherwise have been spent on holidays (hollow laugh!) or commuting has added to the savings pot. There’s also the so-called stamp duty ‘holiday’ that kept getting extended.

Let’s not forget the forecast by economists that Covid would result in a slump in the property market. A wise old friend once told me that if you wanted to get rich you should listen very carefully to the economic forecasters — and then do the exact opposite. He had a point.

But there’s one economic law that never fails: the law of supply and demand. And in housing, demand has exceeded supply spectacularly.

The financial crash of 2008 was something else the economists got astonishingly wrong. They told us we were heading for a great depression and the Bank of England flooded our economy with dirt cheap money. It had to go somewhere and an awful lot ended up in the property market — especially the ‘buy to let’ market.

Demand went up. So did prices. Supply has not kept up.

The Government boasts that 200,000 new homes were built last year. Fine, except that it promised 300,000. And even that would have been the bare minimum needed to meet demand.

A wise old friend once told me that if you wanted to get rich you should listen very carefully to the economic forecasters — and then do the exact opposite. He had a point

So what do young people do when they’re desperate to leave home or start a family of their own? They rent. 

And the cost of renting, particularly in big cities, is sky high. Which means they stand even less chance of saving up to buy a house of their own. Welcome to Generation Rent.

We may wince at that prospect but they don’t in Germany, by far Europe’s richest country. Fewer than half of Germans own their own homes and that’s largely because successive governments have positively encouraged renting.

The advantages are obvious. If the roof leaks, the landlord has to fix it. Moving is not the great drama it becomes if there’s a house to sell and another to buy. There’s a far more flexible labour force.

The disadvantages are obvious, too. Landlords have had far too much power over their tenants. Until recently they were able to throw them out for no reason with just two months’ notice. 

And tenants don’t end up, like so many of us oldies, owning something that’s worth many times what they paid for it. Something that you can call ‘home’. Isn’t that the point?

What do young people do when they’re desperate to leave home or start a family of their own? They rent. And the cost of renting, particularly in big cities, is sky high. Which means they stand even less chance of saving up to buy a house of their own. Welcome to Generation Rent

One of my memories as a small child was the rent collector knocking on the door every Saturday morning to collect two shillings and enter it laboriously into his little notebook.

Another was from my early teens. My father had saved enough for the deposit and he could get a mortgage to buy a house.

It was hardly a palace, but it did have a bathroom and an indoor toilet and, above all, it was ours. No more rent collector. We had joined the ranks of home owners. My parents’ pride was immense.

Happily there is no longer an unspoken stigma in having to rent and many young people I’ve spoken to seem to think owning your own home is no big deal. But that may well change as they grow older and they should not be denied the opportunity.

The most obvious way to make it possible is to rebalance the supply to meet the demand. If that means increasing the pressure on developers who horde land for which they’ve already been given planning permission, so be it.

If it’s outrageous profits they’re after, they could always try building a few more shepherds’ huts.

My thoughts turned to Henry last week. Henry was our peacock. He arrived, uninvited, in the garden of our house in Greece one day and liked it so much he stayed — in spite of Herculean efforts by his owner to reclaim him.

It took the local fire brigade and a powerful jet of water to capture him and return him to his farm where his task was to service many hen peacocks.

But Henry was nothing if not determined and he escaped again. His owner gave up and Henry stayed to entertain us and protect his adopted home.

He met his end when he challenged a feral dog that had encroached on his territory. Henry fought bravely against it but there could be only one outcome.

He was in my thoughts because of a Government white paper published last week detailing the bizarre bureaucracy that has plagued our rail service.

One dispute recorded involved a train hitting a peacock. Who was to blame for the subsequent delay? The rules said if the peacock was defined as a small bird it would be the train company but if it was a large bird it would be the track operators. After much deliberation a verdict was reached.

A peacock is a large bird. Henry would have been proud.

Source: Read Full Article