Bad news. Really bad news. The government's desperate efforts to keep house prices from falling are working.
Ed Conway, writing in the Times, points out that it is impossible to think of any policy over the last five years that has delivered quite as much "bang for its buck" as Help to Buy'. New buyer enquiries are at their highest in three years, and gross mortgage lending is at a five year high.
At the same time, everyone is busily raising their price forecasts for the next few years. Savills has gone for 13%, and previous big time bears Fathom are going for 15% in the next three years. They were forecasting -4%. This is depressing stuff.
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
You can read our take on house prices here (assuming you don't know what we think already!). We still think that the proper crash in the north will one day be replicated in the south in real terms at least. When interest rates normalise, all bets are obviously off. But it is nonetheless very hard to see that crash happening in the short term, given the volume of resources Osborne is putting into preventing it.
But as Conway says, and as we repeat endlessly, "just because something is effective doesn't mean it is right". Britain's problem is not that house prices are too low, it is that house prices are too high.
That matters because it prevents the young buying houses, prevents the middle aged trading up, and makes the elderly complacent about their lack of pension arrangements.
But it also creates a horrible level of inequality across the UK. Chris Giles puts it very well in the FT when he notes that "being born to the right grandparents is more important now than it has been for decades".
While there are certainly a great many people in dire debt, UK households as a whole have housing wealth worth three times their debt. And that wealth is very unevenly spread: "the boom in house prices since the mid-1990s has caused the absolute difference in wealth between the more and less wealthy to shoot up."
This chart shows this to perfection.
So if your grandparents own a big house down south, generational trickle down will mean that you will probably end up with enough of a cash deposit to finance your own house "you can reasonably hope to benefit from a leg up just when you are thinking of settling down".
The result? In the mad housing obsessed world we have allowed our leaders to perpetutate, "education hard work and getting a good job are less important than having the right ancestors".
I don't know why we put up with it and I certainly don't know why so many of us appear to be so joyful when we see house prices rising instead of falling.
PS Given how fast life expectancy has risen in the last few decades, you could make an argument that the rising age of first time buyers is linked to the rising lifespans of their grandparents.
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
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.
