LONDON: The headline promise of Thatcherism was to turn the UK into a home owning, share owning Utopia where the much beleaguered average man could share in the benefits of capitalism. The words change, but the song remains the same. Today, Mrs May has promised to focus on the “JAMS” – the just about managing members of society (presumably the few souls not to benefit from the share and home owning promises of the Iron Lady. Of course, what Mrs May’s carefully crafted spin neatly ignores is that leaving the EU and its single market will harm the poorest members of UK society disproportionately hard. They will need to deal with higher inflation (due to a weaker Pound pushing up import prices), job losses and the inevitable squeeze on social security benefits. Brexit is an unnecessary own goal that Mrs T. would never have conceded.
For many, the chance of finding the money to put down as a deposit on a flat or house of their own becomes more elusive every year. In 2016, house prices grew by 4.5%; the consumer price inflation figure to the year ending in November was 1.2% and wages rose by something like 2% – the upshot of this is that house price inflation (on a very large capital item) has outpaced wage inflation making the idea of home ownership more unthinkable for many on average or below average wages. Of course, real estate prices and salaries vary significantly by region and occupation.
The New Year will bring little comfort for those struggling to find the money to put a deposit on a home with the price rise expected to slow, but stay positive. Halifax, the nation’s biggest mortgage lender, is predicting that 2017 will see an average rise between 1 and 4%. They point out that the currently low cost of mortgages will support the market, but the weakness of Sterling and the uncertainty over what “Brexit Means Brexit” actually means will be a drag on house sales.
According to the ONS, the price of the “average” UK house is about £217000; average (median) earnings for a household of 2 adults are £23600. Traditionally, one could secure a mortgage at 3.5 times joint income to fund a home purchase. Of course, the obvious elephant in the room is that if the effect of a weak Pound on UK imports gets passed on to the consumer (never…), then UK inflation could take off forcing the Bank of England to raise interest rates in a bid to curb it. This would inevitably push up the costs of mortgages and personal debt, making entering the housing market even less likely for many. A major shock to the economy could lead to a deflation of the housing bubble – this would be hugely unpopular with those in the process of buying homes and home owners, of course, but is the only realistic way that poorer members of society can hope to buy a property.