Tuesday, 26 February 2008

Mud huts to mortgages

Don't you think the whole business of finding a home has gone backwards rather than forwards? At one time all you had to do was build yourself a house and you lived in it and owned it and that was that. Now most of us can only get a house by paying someone huge amounts of money - and we may not own it either.

Gone are the days of the humble mud hut or tepee. Now houses are so elaborate most people simply don't have the skills to build one. So we have to rely on someone else to do it and they charge us monstrous sums for the privilege.

Instead of just relaxing and enjoying our home, we have to spend years sweating and toiling to pay the rent or the mortgage. Is this really the height of civilisation? Or is it more like some modern form of slavery in which we are permanently in hock to someone else?

I know that in return for all this cash we may have very comfortable, very well-furnished homes with all mod cons - a far cry from a rudimentary shack with no running water or toilet or electricity. But hasn't something gone seriously wrong here, that a bit of domestic comfort has such a high price attached to it?

Of course homes might be a lot cheaper if it wasn't for the property price phenomenon - house prices going up and up seemingly without end because there are never enough to go round and because it's so prestigious to own your own home.

If it wasn't for that, house prices might even be affordable, instead of costing umpteen times the average wage. As it is, we're now stretching ourselves to our financial limits and beyond, with thousands of homes being repossessed every year.

The housing situation has gone from odd to completely insane and there seems to be little we can do about it. Home Sweet Home? These days, more like Home Sweet Ball and Chain.


TextualHealing said...

Nick I completely agree on this one. The house price inflation thing becomes a self fulfilling prophecy. People no longer see homes as places to live but also as repositories of capital gains. (How many times do you hear people talk about increases in the values of their houses at dinner parties- and I include here even my "right on" friends). The strange thing is that property can increase in value by more than their residents' average income - making them feel that they are getting richer even if they are paying through the nose on their mortgage repayments. I will confess that I benefitted from this situation using windfall equity from a house to establish a business abroad. The downside of that is that I couldn't afford to move back to Britain now (if I wanted to).

Britain and Ireland are the two EU countries with the highest property prices and also the highest home ownership rates. I don't think these two facts are unlinked. Countries with large public (or even private) housing sectors don't see as much pressure on house prices because people have alternatives - they don't feel obliged to get on the housing ladder as soon as their student debts are paid off (let's not go to that one). The problem is that with a majority of homes being owner occupied governments have very little incentive to curtail this feeding frenzy. Tragically every few years the bubble bursts and the most vulnerable get sent to the wall.
Rant over. Can I do a Grumpy Old Men audition on the bais of this?

Quickroute said...

I've never owned a property or even had the urge to own a property. I like the freedom of being able to up and leave at a moments notice, which is something I did again 7 months ago when I left London. If I had a mortgage, I'd struggle to be able to do this.

Some friends who stuck it out thru the hard times in Ireland until the Celtic tiger roared are now sitting in some properties worth...(well valued is a better word)at a fortune. Fair play to them, I say.

Most people here in Buenos Aires rent. Those who can afford to, buy the property outright as mortgages are practically unheard of.

I'd like to be sitting on a fat nest egg of a property to see me thru retirement, but can't help feeling I would have missed out on an awful lot to achieve it. I've missed the boat as far as getting on the property ladder back home is concerned but am not really bothered to be honest. Time to take out the atlas and decide where I'll live next year.

Baino said...

Tough one this, my property is certainly my superannuation plan and I'm close to cashing in but whether I'll buy another is still up in the air because it does stop you doing the things you want. I've become tied to a mortgage and maintenance by default and haven't travelled for instance for 10 years, I don't have the cash to go to the theatre, take weekend mini breaks. The house has become an all absorbing cash cow in latter years and I can't wait to divest myself of the shackle! Plus I don't see the point of these huge McMansions being built along my back fence with no more than two or three people rattling around inside. I don't need an eating nook or a lap pool, an en suite in every bedroom or a pool room! Then I'm the type that doesn't need jewellery or a BMW either.

Wisewebwoman said...

Indentured slavery with no one reaping the benefit of the capital gains, Nick, until death benefits the inheritors.
When did we need all this space?
The place I am house-sitting (and there's another ponderable!)is huge. I have it rent-free for over 4 month, all bills paid. Owners don't like leaving it idle while they winter in their Arizona house.
I shovelled the equity out of my house in Toronto as I have a strong feeling the housing bubble now bursting in the US will filter down to all countries and I wanted to salvage **a little** for my old age.
I am blessed in that my house in NL is debt-free.
I also think that people don't sell their houses as they have absolutely nowhere to go then. And my friends in Ireland can't bear the humiliation of downsizing...

Nick said...

Phew, what can I say? I don't think I can possibly reply to every brilliant point you've all raised. Maybe I'll just let you carry on - unless I think I have some vital contribution.

Interesting that several of us have benefited from rising property prices, even if we feel guilty about it. Jenny and I have benefited too by quite large amounts - but we're very aware it's at other people's expense.

Intriguing, QR, that mortgages are practically unheard of in Buenos Aires. But does that mean most people are perpetually in thrall to grasping landlords?

heartinsanfrancisco said...

Amen. Flip and I bought a four-bedroom house on two beautiful acres with a brook, surrounded by woodland, in TN. Our monthly mortgage payments were actually less than we pay now for a studio apartment in San Francisco.

Real estate prices are obscene. I have always wanted to build my own home, but it has become unaffordable for all but the ultra-wealthy.

There is something terribly wrong with the fact that most of the world's wealth is in so few hands.

Quickroute said...

Nick, Rent here is affordable even for the have nots. The reason mortgages are taboo is that folks don't trust the financial establishments after they were shafted in the 2001 crash. Keeping your money offshore or under the mattress is commonplace.

Thriftcriminal said...

Rob Hopkins has some good stuff on building cob houses, and a book:

Also from Grand designs is Ben Law's exquisite gaff:


He cut most of the material from his wood, and got volunteers to help build it.

Nick said...

Heart – The house in Tennessee sounds idyllic. So why did you move, or have I not been reading your blog attentively enough?

Quickroute – of course, I’d forgotten about the big Argentinian economic meltdown. No wonder people don’t trust the banks anymore.

Thrifty – Interesting links. They show what can be done if you’ve got the confidence. Perhaps our schools should be teaching people how to build their own houses.

Los Angelista said...

I so feel you on this, Nick. When I first moved to my neighborhood here in LA, I could have bought a good sized home for around $180K USD. I was paying off student loans, didn't know if I'd stay in LA, and had no idea how to go about buying a home anyway. Well, those same homes were worth almost a million dollars a year ago. They've come down to around $850K now. It breaks my heart when my little boys say they wish they had a house so we could get a dog, but unless the prices come down a whole lot more, it's not happening. Of course, folks say we should move to someplace like Oklahoma or Kansas, but I really like LA, regardless of the awful real estate bubble. And the earthquakes! :)

Nick said...

That's it, Liz, how the hell can a home that was once $180K now be worth $850K? It's complete lunacy. And that's the situation here, too, so many ex-students paying off massive loans and in no position to buy even the cheapest flat. But I don't blame you shunning Oklahoma and Kansas in favour of LA!

Anonymous said...

Well said Nick, it's all crazy. Here in Scotland, the bidding system for house buying is really hard to fathom. The prices are set at offers over a certain amount, and you have no idea how much it will go for. It is a particular problem in Edinburgh, where house prices are prohibitively expensive. for most people.

Mes Deux Cents said...

Hi Nick,

This is the result of so many people viewing houses as investments rather than homes.

Here in the states for the better part of the 90's and the first few years of this century people have been buying houses that they could not really afford, in hope that they would be able to sell in 3 or 4 years for a nice profit.

Unfortunately hundreds of thousands of those investment house buyers were caught as the market collapsed.

They only way this will stop if governments develop land trusts. These land trusts will have a fixed buy price and a fixed sell price.

That will keep houses from being investments. Then they will remain affordable.

Nick said...

Hullaballoo - Yes, the Scottish system is really odd, with sealed bids and nobody having any idea what offer will be acceptable. Which presumably has the effect of pushing prices way up?

MDC - The scandal of banks lending people ludicrous amounts they'll probably default on just carries on year after year, and every so often as you say the bubble bursts with dire results for thousands of people. Hadn't heard of the land trusts idea, sounds interesting.

heartinsanfrancisco said...

We moved because Tennessee, while very beautiful, had some prevailing social mores that were inconsistent with ours. (I'm trying to be tactful here, not enigmatic.)

Nick said...

Heart, I know what you mean. You have to live in a community you feel comfortable with.