The United Kingdom, and London in particular, is home to the most expensive property market in Europe after Monaco. For a generation of young people who have seen homeownership become unattainable, the idea of a significant drop in prices is inconceivable.
But in a time of inconceivable – a global pandemic, Christmas turkey shortages, Kanye West releasing his album when he said he would – could house prices be next?
I asked Professor Danny Dorling, a social geographer at the University of Oxford.
Is it me or does everyone like to say they bought at the wrong time?
We are British, no one will say, “I bought at exactly the right time and made an absolute fortune!”
Somebody said that for me Last week.
They might be right. There is a chic, narrow house that cannot be enlarged on a canal in Amsterdam where records of every sale have been kept. So we can see how it fluctuates and whether it is more or less than double a person’s average income, for example. It reached its peak almost 200 years ago. It is possible that we are currently at a peak, where prices may not recover for 200 years if there is a crash.
But what if there is no crash?
There will be a fall. There always is.
When? Stronger for millennials in the back, please!
It’s more difficult to predict. But it will be substantial, because we have built such high prices. The worry for your generation is that if you’ve managed to climb the ladder by paying God knows how much and the bigger one comes, you won’t have any wealth. I often wish people would think about this when shopping, but then again, what else can they do? Continue to pay an owner to take cruises?
Could the government stop – or at least slow down – a crash?
It’s already the case. Consult the Purchase Assistance, which helped to support a demand for the supply. It was only for new builds because there wouldn’t be enough people to buy them otherwise. And that would cause prices to drop.
is it possible to help a generation stuck in a precarious rental without much people enter negative equity?
We could restore the right for people to stay longer in rentals, which the government stopped in the 1980s. In Germany, they can’t just increase the rent to get a tenant out; the landlord must redeem the tenant.
How would rent controls make house prices more affordable?
They reduce the amount of profit that can be made from the housing and therefore the house is worth less to an owner. The problem is the unpredictability, as if it were suddenly breaking down. Ideally, house prices would fall 1% below inflation per year over 40 years, and as people pay off more with their mortgages, they wouldn’t end up in negative equity.
it looks complicated and up risk.
I grew up in Oxford and remember a time when a mechanic could buy a house in his twenties. It’s possible. And I understand why people are worried about house prices going down. Someone your age told me recently that his apartment would guarantee he could turn on the heat at an old age. But you only have the money once you sell, and the next twenty years won’t have the money to buy from us like that. Ultimately, we are one of the most unequal countries in Europe. It cannot go on forever.