The elephant in the room: ‘price’ or ‘value’?
An article I wrote last week 27th June 2014.
As far as property owners are concerned, whether owner-occupiers or landlords, rising property prices are generally considered ‘good’. But the paradox created by rising property prices, for our non-property owning residents, goes to the heart of the matter; the ‘elephant in the room’. It’s a party to which they are not invited.
Everyone wants their property price to go up, whether rental or sale. In Brighton and Hove we have become speculators on a rising market and, over the last ten to fifteen years, we earn more per annum from the rise in the price of our homes than we can earn by putting in a hard day’s work. Commentators say that here in Brighton, property prices are on average eight times local salaries…a scary statistic, unless you own one.
Of course that is the conundrum: we want high prices for our property but we want our sons and daughters to be able to buy or rent a home at a reasonable cost.
With the average age of the local first time buyer moving up into the mid thirties, there are many youngsters still living at home now who would have packed their bags and left a long time ago if only they could afford to.
What does it do to people, outstaying their welcome in the nest, continuing to rely on parents instead of ‘standing on their own two feet’, as people used to say? It’s not their fault but could this be a part of the ‘party while you can’ syndrome? - I don’t have to pay a mortgage and I don’t want to sit at home watching telly with mum and dad, so I’ll go out with my mates…every night. Not the best recipe for a maturing local society. When you do not need to learn to look after yourself and budget as carefully as you would if you were a home owner, might that lead to a lack of maturity and devil may care approach as the city of Brighton and Hove is often caricatured?
Amateur psychology aside, the high incidence of binge drinking and other reckless behaviour may be the perfect antidote to being still stuck at home or in shared rentals when you would in fact like ‘a place you can call home’. Perhaps with an ideal tomorrow too illusory, people may give up hope it will happen and so just live for today.
Allied to that is having children later and later: parents want more secure living accommodation than can be achieved on a 6 month Assured Shorthold Tenancy which may or may not be renewed. Landlords’ agendas can be completely out of kilter with tenants’. Back in the day, if you rented, your landlord was likely to want you there for years and years; a professional landlord. Now, it could be someone thinking of selling and waiting for the ‘right time’. Then, you get 2 months notice to quit: not an easy headspace to be in, if you want to start a family. The alternative is buying and, if you want to start a family in your own home, it’s a long time to wait!
As an estate agent, I know I’m only meant to think about the ‘upside’ of rising property prices but, we all as a society need to draw a breath and manage our expectations. You may notice I’ve avoided the word ‘value’, often used by commentators. But the value of a home is more than the price; we all need to move in that direction a bit more.
Property is definitely one of the foundation pillars for a more sound and secure future for our City. If our young people have access to property and so gain willing independence in a stable housing market as buyers or tenants, they can more easily be active shapers of our community not just consumers. For that to happen, we need to start thinking ‘value’ not just ‘price’. Perhaps this is Mark Carney, the Governor of the Bank of England’s message with his remodelling of lending criteria announced in the last 24 hours. We shall see.