Everything’s great. No doubt about it. Why? Because house prices are rising again. All the most recent surveys show strong rises almost everywhere, and that has made a good many commentators very happy. Not me. And, I am pleased to say, not Evan Davis either.
We don’t always agree, but when I went on the Today programme this morning, we were, I think, pretty much as one on the subject. A rise in house prices might feel nice to homeowners, but it is economically useless. We know why prices are going up, and it isn’t because incomes are rising or because prices were getting too cheap (although in lots of places they have properly crashed and do represent some value). It is because a variety of state subsides – from super-low interest rates to Help to Buy – are pushing them up. But what use is a rise in asset prices really?
Those of us who already own houses don’t gain unless we are downsizing, and those of us who do not own houses don’t gain for the simple reason that seeing something we want, but don’t have, go up in price is more bad than good.
The average first-time buyer borrowed £112,500 in May. In June, they had to borrow £117,000. What’s good about that? I missed the politician who came on after me to talk about all this (I was talking to my taxi driver about how his hourly earnings come to less than £5 even during the Edinburgh Festival), but my guess is that he was pretty pleased with the recent housing numbers. Shame.
What I would really like to hear on the radio is not a politician explaining that he and his party have policies that allow you to buy houses by making debt affordable in the short term, but rather that they intend to leave the market alone so houses themselves become affordable. Different things. You can listen to the discussion here.