The British Attitude To Investing Most Of Our Income In Our Properties Must Be Due For A Change.
Ask the man on the street where the majority of their money is tied up and you will most likely get the reply “Oh, it’s all in my property ”. And that will probably be true for a large part of the population as it’s a Modern British Tradition that all your eggs must be in the same basket, i.e. tied up in the house. We Buy Houses in the UK whereas on the continent or in the USA renting is a much more prevalent option. The idea is that in Britain today your money is wholly wasted on renting and that, even though your mortgage payments may be substantially more that you would pay in rent, or indeed can afford, it’s all going to be worth it in the end . When We Buy Homes here the investment value of the property is often going to be an issue and it brings a kind of dual purpose mentality to the purchase of a property. This means that if I want to make an investment in the property market I would have to keep half an eye on the future time when I want to Sell My House as when We Buy Homes in the current environment it’s not just a place to live.
Can this go on ? Can we really have the situation where a large chunk of the population has most if not all of their capital in one place? Any financial analyst would tell you to diversify when investing in the financial markets and not to put all our eggs in the one basket and yet this is precisely what we do when We Buy Houses. I do this myself, struggling to overpay the mortgage, cutting down on luxury items to improve my property all so that when I come to Sell My House I will get a maximised profit on my original investment which I will without doubt re-invest in another house and do precisely the same thing again!
I can foresee the time when we move over to a more continental or American style of paying for our accommodation and we start to consider renting as more of an economically viable alternative than owning property. The reasons for this are as follows:
1. The house market won’t continue to keep on rising as it has in the last few generations . This is pretty obvious as we really cannot reach the situation whereby nobody can afford a house . Therefore property won’t be seen as the super inflationary investment that it has been in the past few decades and people will go back to considering property just for living in.
2. A new financial era wherein cheap loans, incentives to buy property and 100% plus mortgages will not be readily available any longer. Gone are the days of self-certified incomes, no long term employment history etc.
3. Student loans. The previous Labour government started a policy of ever increasing numbers of students going into university and higher education. But there was no provision to pay for these students either in terms of the course fees or in terms of their living allowances. Previous students back in the sixties and seventies would not only have had their course fees funded by the state, but would have had a substantial grant available to tide them over through the length of the course. But then only a small percentage went to university and the state could afford this as the money would be clawed back in increased tax revenues as the graduates would earn more after graduation. It’s obvious to see that modern students, graduating with debts of around twenty thousand pounds, are not going to be in a position to save up a twenty to twenty five percent deposit to satisfy the mortgage companies stipulations in order to buy a home. So a new generation of renters is going to be arriving with each graduation ceremony. It’s obvious.
I think I’ve made the case to explain why the UK’s love affair with the property market may be heading for at least a slight break up, if not an actual divorce! The question is what are we going to do with our money now, and where all these extra rental properties coming from!