Sunday, 18 May 2008

The mood is turning ugly

Yesterday, the Daily Express told us that the housing crash was over. Today, we hear from the Times and the Observer that the middle classes are drowning in debt and the "love affair" with real estate is over.

According to the Observer, debt advice agencies are seeing a "new type of customer - the cash-strapped middle income family". The backbone of Middle England went a little crazy at the high Street bank. Those cheap teaser interest rates were just too attractive; forms were filled out, money was dished out, and far too many consumer durables were purchased. Now, it is payback time, and people just can't cope. Suddenly, it is boom time for debt advice agencies in those dainty little English towns like Tunbridge Wells, Cambridge and Horsham.

Ironically, it is those typical working-class concerns that are now pushing the middle classes over the edge. Big increases in food and utility costs are starting to financially stretch middle-class budgets. With income and wealth polarising in the UK, maybe we are all becoming working-class now.

Middle-class anxiety will not be soothed by today's article in The Times. Six months behind the news, the Times reports that "the consensus has it that the housing boom is over."

Unfortunately, the Times was too blinded by advertising revenues to see the turning point. All the major house price indicators suggest the market turned somewhere between August and October last year. Perhaps, its clarity of vision today comes from a sudden drop-off in calls from developers anxious to promote their latest two bedroomed apartment project in south London.

Whatever the reason, The Times has finally found the housing crash, and thinks it will have a profound effect on the way we see the world. "Downturn, correction, bust: whatever the name, the present situation may even be causing many Britons to question the very structure of home ownership in the UK". Does this mean some of us might prefer to rent and be free rather than buy and live like a serf?

6 comments:

Anonymous said...

Crushed by debt, broken with taxes.

gobsmacked said...

owning a home is no bad thing. paying too much for one is.

buy the right home when it is cheap then live in it.

pay down debt.

aim for no mortgage, no debt and no rent.

lose the fags,the cell phone and the car finance.(probably the booze too). (get healthy)

cut overhead but keep your home.

traderboy said...

The benefits of renting are lost on too many people. I've moved around a lot, it's easy to do, if I don't like a property, or an area, I just move on. Anything breaks, I call the landlord or estate agent and it gets fixed for nothing. Ground rent fees are included in the rent (some places can be £3-4k a year for this).

If I was to buy the current property I am renting, a regular 25 year repayment mortgage at 6.50% (which I think is about the going rate just now) would cost me 60% more than my current rent, and an interest-only mortgage would cost me 27% more. Oh, and I think I'll be able to negotiate my rent down when it nex comes up for review.

Buying makes no sense right now. It MIGHT make sense if property falls 30%, and it will PROBABLY make sense if it falls 50%, but even then I'm not sure about that.

I am now in no doubt that the market will come off substantially, it's just a matter of time, don't stress over what the papers say, the market is coming your way.

Anonymous said...

trader boy, I agree. A rental contract also works like an option. The holder (the renter) has the option to buy a house at any time. A homeowner, on the other hand, is already in the market. The market can not be timed, since the homeowner is both buying and selling an asset.

Zek said...

By heck, its grim up north. Where did you take that snap?

Anonymous said...

Traderboy,

Agreed. I think people haven't put the following two statements together yet:

1) The housing market has crashed;
2) The job market is crashing

When they do they'll turn to the obvious conclusion:

- If I rent, I can move home to get a new job. If I don't get the salary I want, I can rent somewhere cheaper.

That's my attitude in a nutshell. I'll rent until prices collapse and I become sure of my continued income at a level that'll cover the ensuing mortage.

Nick