The size of your granny’s house defines your life

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.

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.