In a rising housing market there is much focus on how much money your home is making for you. Last year the increase in the average property in the South East left its owners £1,411 richer every month. As property gains are tax-free, this was the equivalent, before income tax, of a pay rise of £2,352.
But in a slowdown, attention turns to how much your home is costing you. It’s not that you love it any less, it’s more of a sudden realisation that this relationship, like any other, needs tolerance.
The bill for mortgage payments, insurance repairs and such like now accounts for an average of one fifth of our outgoings, according to the Office for National Statistics’s Family Spending survey. The burden is, in many cases, much, much greater, thanks to the previously liberal lending strategies of the big banks. In the Fifties, accommodation costs made up just 9 per cent of the household budget. This was only slightly more than the bill for cigarettes - renting and high tobacco consumption being then the norm.
This week another survey highlighted the dangers inherent in the sums being spent on keeping a roof over your head in 2008 - the age of the owner-occupier and the smoking ban. The watchdog Financial Services Authority (FSA) revealed that a third of the 5.7 million people given mortgages in the past two years could be riskily overextended. Most vulnerable are the 1.4 million borrowers who face a repayment shock when their discounted fixed-rate loans come to end. The strength of the economy and the jobs market means that it is highly unlikely that large numbers of these borrowers will be made redundant and be repossessed. But, it is still troubling that the FSA - whose job is to keep an eye on the banks - seems only now to be worried.
In a morning-after-the-night-before moment, the banks have turned from munificent to mean. This change has as many negative consequences for house prices as the banks’ former profligacy. But it is also concentrating minds on how confidence can be restored to the market. Robert Bailey, a buying agent, points out that the US Census Bureau defines someone who pays out more than 30 per cent of their salary in mortgage, insurance and the rest as “house poor”. This concept, forgotten in the folly of the US sub-prime lending boom, could be useful in the debate about the post-sub-prime era.
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Dining out
The publicity about the low housing costs of the Fifties coincided with a forecast for the demise of one of the decade’s domestic essentials - the dining room, in which the smiling good wife, with her make-up perfect and frilly apron spotless, served her family with a nutritious dish.
Halifax Insurance estimates that 590,000 more dining rooms will be knocked through this year to create open-plan spaces in which meals are prepared and consumed. By 2020, the dining room and eating together as a family could be no more.
However, predictions about future lifestyles are notoriously prone to error: in the Sixties, the fireplace was a burnt-out feature; by the Eighties, it was hot again and has remained so. Even now, the dining room is experiencing a resurgence at the top end of the housing market, where buyers demand a separate space for entertainment. A case in point is the dining room in a £3.5 million flat in Westminster currently for sale through Chesterton (shown above).
Meanwhile the market’s new chillier mood will mean that anyone selling a house will wish to convey the impression of an ordered family life - which means no TV suppers on knees. During last year’s boom, when property for sale was scarce, buyers were unperturbed by dishes left in the sink; this year they will be offended. A table laid with the best china, suggesting a civilised supper, with children minding their manners and parents conversing on the latest in film and theatre, sends out the message that this happy scenario is thrown in with the price.
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Call in Mum and Dad
Collapse and crash: both fine, emotive words, but neither of them quite suitable for the latest price statistics which suggest uncertainty rather than panic. Hometrack reports that prices slipped by 0.3 per cent last month while Nationwide’s numbers for January show a decline of just 0.1per cent.
Our story on repossessions reveals how investors are exploiting the downturn, snapping up repossessed homes that turn off other buyers who dislike the cold, unwelcoming atmosphere of such properties - and the stench of failure. First-time buyers, even those with no such misgivings, are yet to benefit, however. They simply cannot afford to do so, as figures from the Royal Institution of Chartered Surveyors (RICS) indicate. High street banks are demanding bigger deposits from borrowers. There may be more calls than ever this year on that more understanding institution - the Bank of Mum and Dad.