Three cheers
January 24, 2008I’ve come across a really good comment in the FT the other day and have kept the page on my desk at work every since - with the intention of sharing it with you guys. Due to copyright issues I won’t be able to recite the whole article here (nor would I want to), so I’m just going to quote you the best passages.
The original comment was written by Jonathan Guthrie and was published in the FT on Thursday, January 10th. The heading reads “Three cheers for falling property prices”.
“The assumption that rising house prices are good is deeply embedded in our culture. A belief in witches was too, years ago.”
“We pay a heavy price for the delusional comfort that comes from owning expensive homes, both in loan charges and distorted personal priorities.”
After discussing the amazing property returns we have seen in the UK over the last 12 years (160% on average, 193% in London), he observes the following
“Such inadvertent financial coups confer bragging rights at dinner parties from Barnet to Bromley. Yet the tiramisu-scoffing asset allocators could only realise their swollen capital if they relocated permanently to Barnsley.”
“The main beneficiaries of steep prices are therefore footloose retirers […] fly-by wrinklies too mean to sling younger relatives a few grand towards their own homes.”
He continues to wonder why people could possibly interpret rising house prices as something positive…
“[…] given that disposable income would, all things being equal, rise if mortgage costs fell. More Britons could then afford the ultimate contemporary status symbol, a full tank of petrol.”
…and examines the consequences of such an attitude…
“Television makeover mavens have shown soi-distant developers how to make a packet by tarting up a basement bedsit and advertising it as a garden studio.
Buy-to-let investors have piled into residential property in […] Balkan towns whose names they cannot pronounce.”
And he finally concludes
“My hostility to national property bingo reflects ambivalence at my own commonplace success in it. Like many Britons, my annual capital gains after costs have been equivalent to almost half my salary for no more effort than a little light decorating. But I am no richer as a result, unless I sell up and sleep in a ditch.”
His opinion is so different from the often-recited press view that you instinctively want to disagree with him. However, you come to realise quite quickly that he has an awful lot of perfectly valid points and the more thought you give his argument, the more you’ll see his point.
If you’re intrigued and want to read the whole article, you should still be able to access it here, but I’m not sure whether or not you might need a subscription? In any case, enjoy!
I have often been bemused by the people who are
tuftey | February 4, 2008 | 5:13 pmI have often been bemused by the people who are lucky enough to own a house and there smugness at rising house prices. You can only make money in the property market if you own more than one property (you must always have somewhere to live) or you are willing to live somewhere cheaper
Rising house prices benefit so few people in real terms
Economonkey | February 6, 2008 | 4:13 pmRising house prices benefit so few people in real terms that it constantly amazes me how many people think it’s a ‘good thing’ that the market has rocketed skywards. The truth is that we all end up paying much more of our income just to put a roof over our heads, and a growing number of people are squeezed out of the market entirely. The property boom has, without a doubt, made this country a far worse place to live.
An excellent article! Thanks Kirsten. This overlaps with an article
Jimbo | February 6, 2008 | 10:11 pmAn excellent article!
Thanks Kirsten. This overlaps with an article I read in the IHT online today about Americans. Sorry for posting a link, but you might find it interesting:
http://www.iht.com/articles/2008/02/05/business/spend.1-217296.php?
Money/wealth is a very psychological thing, isn’t it?
PS smashing blog, hope you’re enjoying graduate life in London (and not going to Inferno’s too much…)
Guys, thanks so much for all your comments. I'm sorry
Kirsten | February 11, 2008 | 12:03 amGuys, thanks so much for all your comments. I’m sorry for replying this late, but I was a little under the weather and hence didn’t check on the site as often as usual.
It’s interesting to see how many people seem to agree that rising house prices are in theory NOT a good thing, yet every single newspaper article you read has a negative edge if it reports a fall in property values (just this weekend’s FT…).
Yes, this might be related to the fact that the primary audience of the FT actually owns property(ies), but I find it a general attitude in society rather than an upper class cocktail party story.
Thanks for the link to the article Jimbo. It’s indeed very informative even though I don’t quite agree with the “Let’s not ever use credit cards again and pay everything in cash”. Not only because you’d end up carrying around hundreds of one-dollar bills that just seem to accumulate in your wallet, but also because you miss out on lots of great benefits that you can reap if (and only if!) you use the cards sensibly. But I guess that’s a topic for another post!