In 2007, 70% of UK households owned their own homes. Now just under 65% do. There are all sorts of reasons for this see my blog here on rent controls for a few. But there is of course an element of pricing in here: the higher prices go the fewer successful first time buyers there are in the market.
But one point we have made over and over again in this property cycle is that the overpricing of houses is very much a London/southeast problem (one that is a function of foreign buying, of credit, and of the number of people in London finally getting back to pre-WWII levels).
It is also one that we have long assumed the market will deal with in the end. In my blog post fromlast year, I suggested that anyone thinking about moving out of London got on with it: prices between London and the rest of the country often diverge, but they also always snap back in the end. That's because the market works.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
When people can't afford to live in one place, they move to another place and prices adjust accordingly. It might not happen as fast as some might like (and prices in the south have clearly over shot on the upside). But it happens. And that's good.
Early last year it looked like time for the snap back to start in the UK (either by London prices falling or non-London prices rising). It now is: house-price growth is falling in the capital and rising elsewhere. The question this time is just how it will go.
The overshoot has made houses some distance from London look remarkably attractive. But the price differential also coincides with a time when many of our other cities are revitalising and when remote working is finally becoming more than just a dream for the nation's professionals.
Let's start with the countryside. A report from the Office of National Statistics (ONS) this week told us, as The Telegraph puts it, that "a new breed of refugees" is leaving the cities for a better quality of life in rural Britain.
Over the next ten years, more than half a million people are forecast to leave the city to settle in the country. These people will be "significantly wealthier, better educated and more enterprising than the population at large."
They will be more likely to set up a business, and to drive up economic activity and hence productivity than your average buyer. That rather suggests they might pay more for houses than your average buyer too.
The Institute for Public Policy has come up with similar research noting that those who find London too expensive will either move to the country or to other cities think Bath, Oxford or York. From there they can easily set up new businesses or work from home three days a week and in London two days a week.
As Rosie Millard points out, also in The Telegraph, the "internet revolution is a massive boost to this way of thinking. The fact that so much work can be done remotely wherever there is a wifi signal "helps spread wealth around the country" rather than keeping it focused on traditional hotspots.
I suspect a good number of the London leavers will be heading north, where houses are priced roughly as they should be and some of the larger cities are booming with interesting start ups and talk of the promotion of a northern powerhouse created via transport spending and local devolution.
Note that George Osborne has recently announced that the Tories are the "party backing the north".
We aren't generally great fans of property investment, but if you want something for the next ten years, you could probably do a lot worse than a good house in the north (of the kind the ONS's new rural refugees would like to live in), close-ish to a mainline station within three hours of London.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
