When I'm in London I've started using Uber. It's having an interesting result. You won't, I know, have guessed this, but I am intensely competitive at heart and Uber drivers rate you out of five as a passenger the instant you get out of their cab. I've taken four rides now. I'm a perfect five. And I really want to stay that way.
So if you ever want to see me at my most charming, take a cab with me. I'm always ready when the car arrives, always smiling and always chatty. A better me. And that's how I ended up spending a 45-minute trip from Bloomsbury to Dalston this week, talking about the driver's property portfolio.
He got his first house in London via his right-to-buy council house. He then promptly borrowed against the automatic equity in that to purchase ten buy-to-let properties in Durham on amazing-sounding yields. He'll be buying more when the value of those has risen enough for him to borrow more against them although not in London, where he quite rightly considers the yields to be far too low for comfort.
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I wouldn't necessarily be recommending this kind of thing at the moment the change in the buy-to-let tax regulations makes it much harder to create positive cash flow when you have a mortgage but I thought it would be best not to say so at the time. The last thing I ever want is for any driver to end our time together more worried than he started it that way three stars lies. I also thought it best not to suggest to my nice driver that he was no less than the personification of the UK's housing problem proof that the problem we have is not supply, but demand.
Conveniently, Fathom Consulting has just put out a report on this very matter. It notes that after its peak in 2008 the price-to-income ratio for house prices in the UK fell from its (eye-watering) all-time high of 6.2 times to 5.2 times in 2013. It then rebounded and is now back "within a whisker" of its earlier high. Today, for the house price to income ratio to come back to its long-term average, property prices would have to fall 40% or "household income grow at ten times its current pace for the next ten years".
The popular interpretation of this is it is all about supply. There just isn't enough. That then makes the solution obvious to everyone: build more houses. "The way you get affordable homes is to build more homes," says George Osborne, the chancellor. But once you start to look at things properly (and sign up to Uber), it is obvious that this isn't quite right.
Look at rents. If there just weren't enough places in the UK for everyone to live, rents would be rising as fast as house prices and the rental yields that investors get wouldn't be falling. That's not what's happening. Fathom points out that house-price inflation has trumped rental inflation by 2.3% a year since 2006.
Look at the most recent numbers from the Office for National Statistics and you'll also see something of a non-problem: private rental prices across the UK rose by only 2.6% in the 12 months to March 2016 private rental prices across the UK rose by only 2.6% in the 12 months to March 2016 a little more than GDP (currently forecast to be around 2% this year), but really not much.
In London, things aren't exactly smoking either. According to property investment firm PCL, the rents on newly refurbished properties in the capital rose only 0.3% in the first quarter of this year. Those on "relets" old properties let to new tenants actually fell (1.2%).
And the Generation Rent we all so like to worry about? A recent report from Fidelity International showed them spending 14% of their income on "dining out and experiences". They might not be able to afford to buy a house. But they aren't exactly being crippled by their rents, and they aren't quite as crammed together as you might think either.
The number of households in the UK has risen by 7% since 2005, but ONS numbers suggest that the number of people living in each of those households hasn't. Our current average of 2.4 people is the same as the European average and the same as it was in 2003. If there was a genuine shortage of homes, the three-generation homes and boomerang kids we hear so much about in the media would be showing up in these numbers. They aren't.
There are plenty of houses knocking about to live in (and around 600,000 empty ones in England alone). And if the problem isn't some kind of obvious supply constraint, it has to be demand. This brings us to Help to Buy. As Fathom points out, the price-to-income ratio started rising again, just as Osborne introduced Help to Buy in 2013. Between then and the end of 2015, nearly 74,000 houses have been bought under the scheme; 81% of them to first-time buyers.
And here's the interesting number: 31. That, according to analysis from the Mortgage Advice Bureau, is the average age of first-time buyers under Help to Buy, despite the fact that the age of the average first-time buyer is currently 37. The scheme is pulling what would be tomorrow's demand into today.
That's not the only thing pushing up demand, of course. There's also low interest rates. It's worth reminding yourself regularly that rates have not been this low in the UK for at least 300 years and probably never; something that both makes people want real estate for the yield it offers and allows them to borrow the cash they need to buy.
However, the thing about all this demand is that it can disappear with one tap of a keyboard. Come the end of Help to Buy, combined with a sharp rise in interest rates, we'd have a crash on our hands, a bad one as things stand and a really bad one if our response to all this slightly unreal demand is to concrete over the greenbelt.
So should you worry? In the short and even medium term, the answer is probably no. The government hasn't put all this time, effort and money into keeping house prices high to give it all up now (I suspect that if they weren't mildly worried about house prices, they'd all be Brexiteers).
It's also worth remembering that not all of the UK is overpriced (maybe Durham isn't). But over the long term, if you have pegged your long-term financial future to nothing but a buy-to-let home bought at bubble prices, the answer has to be yes. It really can't last for ever.
This article was first published in the Financial Times.
