10 reasons why I'm looking forward to the house price crash
02-08-2016
"The bubble is now so big, once it started it would quickly become totally unstoppable" Credit: Peter Payne
By Alex Proud
There are loads of items on my unlikely-to-come-true wish list for the next five years. In order of improbability, some of these are: The Liberal Party having more MPs than my immediate family has members; the discovery of a clean energy source that results in more than a feature in the New Scientist; an opposition that makes Cameron’s job harder, not easier; an economy that doesn’t look like a giant octopus centred on the City; and a house price crash.
You’ll notice I put the house price crash last. That’s because, although I don’t think it’s very likely, it could happen. I’m not going to list signs of a coming property apocalypse (propapocalypse?) because there are always signs. Like everyone else, I’ve given up looking for straws in the wind; there have been so many of these, I could have built a haystack over the last decade.
Nonetheless, I can see how it could happen – and because the bubble is now so big, once it started it would quickly become totally unstoppable.
Easy come, easy go: (Monopoly) houses Credit: Alamy
I’ve also got to the point where I think a London crash would be a really good thing. If you live in the South East, the property market functions for nobody except buy-to-let investors and old people who want to move somewhere cheaper. Also, the craziness has gone on too long. We’re now well into Tokyo 1990 territory and it’s hard to see how we get out without a crash. Not least because, if the market does turn, I just don’t believe Chinese investors will prop up prices in Forest Hill.
Anyway, should any of this come to pass, here are ten reasons to be cheerful. As I say, it probably won’t happen, but it’s lot more likely than the Lib Dems having any influence in government.
1. Normal people would move back into London
How I would love to be introduced to a new neighbour and hear something like, “I’m a nurse” or “I’m a teacher”; even “I’m a doctor” would do. These days it’s basically “So, are you a banker or lawyer?” I've got nothing against bankers and lawyers, except most of them are like the dull minor characters in American Psycho.
While we’re at it, if we had a crash, Mayfair and Chelsea might actually have residents again. At the moment, they’re ghost-towns inhabited mainly by security guards, and occasionally enlivened by chavvy Middle Eastern playboys street racing their Lamborghinis. As Boris keeps telling us, this is what being a great global city is all about.
2. We could forget about Lord Sugar
Why is Lord Sugar so rich? Well, it’s not from selling landline phones that can display your emails and look as though they were made in North Korea. It’s from property.
Sugar was in the right place at the right time - and honestly, starting from his base, in London over the last two decades, it would have been more difficult to lose money.
That Sugar is more a property tycoon than an entrepreneur may also explain why every single contestant on The Apprentice looks like an estate agent.
3. Branches of Foxtons will close down
I’m not even going to try and be clever here. Can you imagine the feel-good factor as branch after branch of Britain’s ghastliest business shuts up shop? Can you imagine the cheering in the streets as the nasty green and yellow livery comes down and the premises are turned back into pubs, restaurants and shops? Can you imagine the pleasure of knowing that never again will one of those stupid little minis cut you up at a junction?
Dare to dream.
For years Britain’s buy-to-let landlords have been making one way bets, subsidised by the rest of us. What should have been stupid risks have turned out to be smart moves thanks to artificially low interest rates. The crash that would have wiped them out never came because governments have effectively bailed out the property market.
However, low interest rates have victims too. They penalise ordinary savers. And the artificially high house prices they create represent a tax on the young when they buy two bedroom flats for £450,000. So, I’d raise a glass to a massive buy-to-let fire sale, which would mean estate agents actually having to do some work in a buyers’ market.
5. Money will be freed up to perform more useful tasks
Overpriced property is a massive drag on the UK economy. For starters, every pound that goes into rent or mortgage payments is money you don’t spend on goods or services. If your rent was lower, you’d have more to fritter away on restaurants, holidays, cars, entertainment – and other stuff that’s good for the economy.
"I don’t feel very good about the unearned hundreds of thousands I’m now sitting on"
Alex Proud
This works from the other side too. Every pound that investors don’t put into bricks and mortar generally goes into more useful and productive things, like growing businesses. Economists warn against the creation of a rentier economy, but this is exactly what we’ve done.
6. I’d feel less dirty
You might view this piece as sour grapes, but it’s not. While it’s true that I managed to miss out on the 1997-2007 property boom, I made out like a bandit on the 2008-now property boom. I bought a flat that was a bit too close to the railway in Primrose Hill just before people decided that living near train lines was no big deal.
But here’s the thing: I don’t feel very good about the unearned hundreds of thousands I’m now sitting on. And I’ve noticed that a few other people have started to feel uncomfortable too. It may be out of sympathy for nurses (and, increasingly, doctors) – although more likely it’s because they’ve realised that their kids won’t be able to afford houses.
Whatever, watching my flat double in value has made me feel like a wartime profiteer. So if it falls by 20, 30 or even 50 percent, I’d be OK with that. It’s not like I did anything to deserve the gains.
Jim Mellon: This stat tells you why London house prices are falling
7. The media will be better
I remember at one lovely point around 2008 watching Sarah Beeny take some money-grubbing micro-developers in hand. It was the standard format. She gave them loads of good advice and they ignored the lot. As the market was flat, they lost money. It was kind of brilliant. Nobody quite believed it had happened and it made great TV.
Then we went back to the norm: no matter how stupid you are and how much money you waste, you’ll still come out ahead. While we’re at it, I’m sick of reading tabloid stories about people owning £1 million pound houses and thinking, “that’s quite a lot” only to discover that the house in question is a semi in West Norwood.
8. People will go into more useful jobs
Our lopsided economy has given me a very inclusive view of what is a socially useful job. 20 years ago, I’d probably have said it was just things like being a doctor or a teacher. But now... frankly, if you don’t build speculative pyramids out of terraced houses or work in the less reputable parts of the City, you do a socially useful job.
Toby Jones's banker in Capital leads a privilidged lifestyle
Toby Jones plays a Claphamite banker in BBC drama Capital Credit: BBC handout
Seriously, though, how great would be to see our best and brightest go and work in fields like science, medicine and engineering? You know, like they do in countries with real economies like Germany.
Instead, they get jobs at JP Morgan with a view to building up a buy-to-rent portfolio and retiring at 35.
9. London will be cool again
For me, this represents one of the biggest and happiest market failures of all. Rich people still haven’t figured out how to be cool. No matter how wealthy they are, they just can’t do it and when they try and buy pre-existing cool, it invariably runs through their hands like so much sand.
Canary Wharf: stunningly uncool Credit: Alamy
This is why there is more style in the backstreets of Deptford than there is in the whole of Dubai. It’s also why Notting Hill has gone from Bohemia to a sterile Disneyland for bankers’ wives.
Anyway, I’ve come to the conclusion that real cool can only be grown organically and in relatively inexpensive areas. A cheaper London would be a much cooler London.
10. Dinner parties would be less tedious
People have been moaning about smug middle-class types boasting about the value of their houses for 15 years now. And yet, the smug middle classes just can’t help themselves. In fact, the only thing they’ve learned in the last decade and a half is that you should preface your gruesome housebrag with “It’s dreadful but...” As if that makes that makes you any less of a prick.
If house prices went down the pan, your friends who bought in Highgate in 2004 would be faced with two choices. Either they’d have to find something interesting to talk about or, even better, they could tell people how much money they’d lost in the last six months. In which case, I guarantee they’d have everyone’s attention and it would be a enjoyable, memorable evening for all concerned.