A house is a machine for living in.
Listening to the radio the other day, I heard a ‘housing market expert’ talking about the current state of the market. He came up with two theories, both of which I have issues with.
Firstly, he suggested that the growing weakness of the pound against the dollar means that American money may well start to come back into the housing market, particularly at the top end, and most likely in London.
Secondly, he suggested that there is a floor for house prices which, once reached, will be the bottom point, at which time we will see prices start to inch upwards again. The tricky thing, of course, is to spot the floor, however this expert said he believes the floor to be 2001 prices.
To start with his first point: The pound may be weak but then so is the American economy; after all that’s where this whole housing collapse started. And this side of the pond the top end is suffering too, as evidenced by the fact that one of the poshest building companies around has been placed into administration. Robin Ellis Construction worked on multi-million pound projects and was once rumoured not to consider any job worth less than £1m. But even the Russian billionaires are cutting back it seems. Even if American dollars do start to come back at the top end, it’s hardly going to help the rest of us further down the food chain.
Which takes me to the second point. A floor for prices at 2001 levels is all very well if you bought your house before then. But how many people bought property between 2001 and 2008? Millions. For those people, the thought that their most expensive purchase is worth less than the mortgage on it is worrying in the extreme, especially if they are worried about losing their jobs. Having said that , negative equity is only really a problem if you have to sell your house. If you don’t need to sell, you can just sit tight and wait for prices to rise again.
The trouble is, that’s what people are doing right now. They’re staying put because they don’t need to move, don’t have the confidence in the market to move, can’t get the finance to move or simply can’t get the price they need in order to move. And housing transactions are what drives, to a greater or lesser extent, spending on RMI so we can’t expect things to get better in that department for quite a while yet. Especially as getting loans for big home improvements is going to be nigh on impossible
Still, some-one asked the other day, if there is so little building going on, how come it’s as hard as ever to find a builder to do your work. I think it’s precisely because builders don’t know where their next job is coming from that they are taking on every job they possibly can. How long those jobs will be around next year though is anyone’s guess.