FMS-Blog : The Wildly Whimsical, Mostly Musical WebLog
Tuesday, October 17, 2006
Economic decline might be good for us
How many people do you know who have recently purchased a second, third or fourth property, or very soon plan to do so? If you’re social group is anything like the ‘average’ then the chances are you’ll be acquainted with a number of these people and will possibly be one yourself!
As property prices in the UK continue to rise, more homes are being bought up, most often on money borrowed from the bank over a long period of financial commitment, that in turn stimulates the market, encourages those who are already in a financially secure position to take advantage and take a step or two up the ladder, further increasing house prices and isolating those on lower incomes and those who do not already own a property from getting into the system in the first place. Ironically, this latter group are the very people who are then forced to rent a home from those who have been able to take out further credit – thus, they pay the mortgage that they cannot themselves afford to get whilst simultaneously lining someone else’s pocket: someone who is already much better off than they are.. or, so they think.
You might ask how this is different from ten or twenty years ago when traditional landlords owned dozens of properties that they rented out to many less fortunate families? I think the shift that has taken place is really one of the choices available to young people and those in lower income brackets. Simply put, there is no longer a choice for these groups. As a result of the greedy, paranoid society that has developed into the beginning of the 21st century in this country, young people are faced with options ranging from relying on financial assistance from their parents (which isn’t always forthcoming or available), renting a property at an enormously over-inflated monthly rate, or else (where possible) getting onto the property ladder by signing an agreement that locks them into a commitment over a period covering their entire working life – a future that is simply far too long to make an accurate prediction of uninterrupted employment. Of course, for those who are in unskilled jobs and / or are single, even this latter option is not on the table and since most undereducated people stem from a background of poverty and inopportunity, a lifetime of paying someone else’s 2nd or 3rd mortgage is likely to be on the cards for these unfortunate people.
It’s not as if I don’t understand the reasons why many people are now rushing out to increase their mortgage commitments, either to make improvements to their homes or to purchase additional properties: there is a strongly held belief that, when it comes to the long-term future for those who are in work now, and for their children soon to enter the working world, the government will let us all down, bail out on providing a decent pension and leave us high and dry but for the investments we have made ourselves in the years when we were able to do so. But, I’m afraid that this fosters a false hope that, like in a game of Monopoly, buying up as much property as possible to get above the waterline will lead to long term financial security, and presumably to hell with those who fall by the wayside. Personally, I can’t see that this is a realistic view: most purchases of additional properties and home improvements are being made on some form of credit and although it is true that the average income is also on the rise the rate at which it is growing is nothing compared to that of the debt this country is sinking into. Sooner or later, the bubble has to burst – it might start with a few people finding that they’re deeper in credit than they had anticipated or with some major event such as a war, but the landslide is all set up like dominos ready to fall.
My view is that it is time for people to start taking responsibility for all our futures, realise that buying up properties is not only foolhardy but that it is also supporting and encouraging the growth of a system that is totally sick – a system that feeds off the greed and insecurities of those who are currently financially better off than most, leading them down a path to inevitable hard times ahead, while also abandoning those who are desperately clinging onto the thin end of the wedge. A return to affordable housing for all is essential if we are to regain a fairer society in which first-time buyers do not have to sign away an entire lifetime for the privilege of having a place to live that will not be lifted from beneath their feet at the drop of a hat, or a downturn in the economy. Perhaps a depression in the market is what it will take to curb the spiralling selfish attitude towards property in our society. If that’s the case, then so be it.
As property prices in the UK continue to rise, more homes are being bought up, most often on money borrowed from the bank over a long period of financial commitment, that in turn stimulates the market, encourages those who are already in a financially secure position to take advantage and take a step or two up the ladder, further increasing house prices and isolating those on lower incomes and those who do not already own a property from getting into the system in the first place. Ironically, this latter group are the very people who are then forced to rent a home from those who have been able to take out further credit – thus, they pay the mortgage that they cannot themselves afford to get whilst simultaneously lining someone else’s pocket: someone who is already much better off than they are.. or, so they think.
You might ask how this is different from ten or twenty years ago when traditional landlords owned dozens of properties that they rented out to many less fortunate families? I think the shift that has taken place is really one of the choices available to young people and those in lower income brackets. Simply put, there is no longer a choice for these groups. As a result of the greedy, paranoid society that has developed into the beginning of the 21st century in this country, young people are faced with options ranging from relying on financial assistance from their parents (which isn’t always forthcoming or available), renting a property at an enormously over-inflated monthly rate, or else (where possible) getting onto the property ladder by signing an agreement that locks them into a commitment over a period covering their entire working life – a future that is simply far too long to make an accurate prediction of uninterrupted employment. Of course, for those who are in unskilled jobs and / or are single, even this latter option is not on the table and since most undereducated people stem from a background of poverty and inopportunity, a lifetime of paying someone else’s 2nd or 3rd mortgage is likely to be on the cards for these unfortunate people.
It’s not as if I don’t understand the reasons why many people are now rushing out to increase their mortgage commitments, either to make improvements to their homes or to purchase additional properties: there is a strongly held belief that, when it comes to the long-term future for those who are in work now, and for their children soon to enter the working world, the government will let us all down, bail out on providing a decent pension and leave us high and dry but for the investments we have made ourselves in the years when we were able to do so. But, I’m afraid that this fosters a false hope that, like in a game of Monopoly, buying up as much property as possible to get above the waterline will lead to long term financial security, and presumably to hell with those who fall by the wayside. Personally, I can’t see that this is a realistic view: most purchases of additional properties and home improvements are being made on some form of credit and although it is true that the average income is also on the rise the rate at which it is growing is nothing compared to that of the debt this country is sinking into. Sooner or later, the bubble has to burst – it might start with a few people finding that they’re deeper in credit than they had anticipated or with some major event such as a war, but the landslide is all set up like dominos ready to fall.
My view is that it is time for people to start taking responsibility for all our futures, realise that buying up properties is not only foolhardy but that it is also supporting and encouraging the growth of a system that is totally sick – a system that feeds off the greed and insecurities of those who are currently financially better off than most, leading them down a path to inevitable hard times ahead, while also abandoning those who are desperately clinging onto the thin end of the wedge. A return to affordable housing for all is essential if we are to regain a fairer society in which first-time buyers do not have to sign away an entire lifetime for the privilege of having a place to live that will not be lifted from beneath their feet at the drop of a hat, or a downturn in the economy. Perhaps a depression in the market is what it will take to curb the spiralling selfish attitude towards property in our society. If that’s the case, then so be it.
