Austerity + Aspiration = Asperity, defined by dictionary.com thus:
1. harshness or sharpness of tone, temper, or manner; severity; acrimony: The cause of her anger did not warrant such asperity.
2. hardship; difficulty; rigor: the asperities of polar weather.
That seems very appropriate. Mr. Shapps' speech deserves further comment, as it was the first that he made after being appointed, and offers a helpful insight into the government's attitude to home ownership.
Now, my predecessor famously said that falling levels of home ownership were 'not such a bad thing'. I've asked RICS to host this event to make clear from the outset that I believe that home ownership is a very good thing. In fact I will work every day to help people achieve their aspirations to own their home.
Of course I am not arguing that everyone should somehow aspire to home ownership. Renting a home can be a positive and flexible choice. And social housing provides a sense of security for millions of families. I am simply saying to those who aspire to own their own home -
This Government will support you
You will not be ignored
The age of aspiration is back!
Does this sound familiar to anyone? Say, from the last Conservative government? Is it really the case that homeowners have been 'ignored' by policy-makers recently? And, in the aftermath of a house price bubble that nearly brought down the world economy, is it really sensible to announce that the 'age of aspiration' is back?
But wait, there's more! An explanation of how the new minister will support these aspirants, perhaps....
The best thing we can do for the all-important First Time Buyer is to get the economy back onto a sound footing... [cuts, cuts, cuts]
Borrowers will need to demonstrate financial responsibility and show that they can sustain homeownership.
In return lenders will need to support creditworthy homeowners. I know the housing market is still fragile but we in Government will do all we can to help.
Here we hit a contradiction. At the moment, banks aren't providing many mortgages, because they lent too easily before and the resulting mayhem nearly brought them down. The levels of mortgage lending pre-September 2008 were unsustainable, and should not be repeated. Of course, this means that some people who might want to buy a house cannot borrow money in order to do so. Likewise, the comment about financial responsibility is all very well, but in an environment of rising taxes, job insecurity, and extremely low interest rates on savings, that's much easier said than done.
In case of worry that the government is doing nothing:
The Coalition Government has also agreed to promote shared ownership schemes and help social tenants and others to own or part-own their home.
Since the new government got in, hundreds of millions of pounds has been cut from the very budgets that pay for shared ownership and social housing, for this year alone. Indeed, after making this very speech, Grant Shapps ad-libbed 'the cash for affordable housing has run out'.
You can't square this circle. The government is saying that as many people as possible should aspire to buy a home, but it won't help them do so. Aspiration without any ability to realise your wishes just leads to frustration. I can scarcely think of a less appropriate time, except perhaps November 1929, to deliberately raise people's expectations in this way. This speech also supports my previous comment that the new regime is entirely indifferent to private renters.
Now, a quick tour of owner-occupation at the moment. About 70% of households own their home. This proportion had been rising for the past few decades, but now seems to have peaked and is starting to fall.
The world of house prices is a mysterious and murky one. Pre-credit crunch, commentators agreed that they were rising, and by roughly how much (a lot). When the crunch hit in September 2008, housing transactions fell by more than half and have yet to recover. This has shown up the previously not noticable differences between the way mortgage lenders, government and independent organisations measure price changes. I won't go into the details, because they're very dull, but there's wide confusion about whether prices are going up or down.
The easiest answer is both. As usual, the South of the country is recovering faster than the North. Overall, prices seem to be creeping up again slightly. My guess is that property is seen as a safe investment in risky economic times, with reason given the long-term structural undersupply of housing. Incidentally, the average age of a first time buyer is currently 37.
The affordability of buying a house is measured by taking the ratio of average earnings to average house prices. The benchmark for affordability is generally 3.5 or 4:1. It's still realistic to get a mortgage at that level now, provided you have a deposit of 20-25% of the purchase price of your new home and an impeccable credit record, of course.
Ratios are well above this throughout the South of the country, despite falling since September 2008. Take Cambridgeshire. The least expensive district in this county to buy a house is Fenland, with a ratio of 4.7: 1 (February 2010). Almost affordable. The most expensive, unsurprisingly, is Cambridge, with a ratio of 8.7:1. In the very centre of the city, where the most sought-after housing can be found, the ratio exceeds 12:1. Remember, average earnings in Cambridge are much higher than in Fenland, but the ratios show that house prices are an order of magnitude greater still.
The Cambridge News recently led with the following headline: City house prices soar £60,000 in just a year. The vastness of this increase, 26% up on 2009, conceals the fact that transactions have fallen by more than half. The people still shopping for houses are not first time buyers, and they're purchasing high-end. Whilst one-bed flat transactions are down by about two thirds in two years, four bed houses are showing only a quarter fall in the same period.
In short, if you live in the South of England, especially Cambridge, and don't already own a home, the chances are that you won't be able to afford to buy one. But don't forget to aspire.
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