There has been increasing speculation that the perfect storm of factors (increasing energy prices, cost of food and drink, tax hikes, fuel costs etc) could result in a recession and a subsequent crash in house prices. I have seen many people on the left celebrating this potential latter consequence and thinking that the rich and those with lots of properties will lose out were this to occur. I will try to explain why such a belief is, at best, incredibly naive.
Full disclosure: A while back, I was briefly a (somewhat accidental) landlord for approximately 18 months. The circumstances were that I rented out a single property on behalf of my late mother to help pay for her care home fees. I did this and all the admin (tax returns etc) without taking a penny in return. Now, according to a significant (majority?) portion of Lefty Twitter, this made either me, or her, possibly both of us, the scum of the earth under ALAB (All landlords are bastards). The fact that both of us had/have worked all of their lives doesn’t seem to matter. I always tried to be fair and reasonable to the tenants, despite difficult circumstances which I won’t go into here. I have also been on the other side of the fence in that a long while back I rented properties with some friends where we were treated very badly by the owners on more than once occasion. So I think I’m capable of a balanced view on this.
To start with, a housing crash would be a disaster for first time buyers. “But they will find it more affordable”. Wrong. That £250k house is likely to be worth only say, £200K in a year or two. What bank is going to give you a mortgage with a 5-10% deposit when they will be unable to get their money back if the worst were to happen (and house price crashes are strongly associated with a collapsed economy and major job losses)
Secondly, for those who do not remember the eighties, negative equity is a massive problem, mainly for recent buyers who have not had time to own their properties for a significant period. Let’s say you want to change jobs and move nearer to the new one, how would you be able to sell your house when it is worth a lot less than you paid for it? You would be trapped. The same would apply if you wanted to move for social reasons, such as being nearer to family, or being next to neighbours who you did not like.
Finally, the rich with huge houses and property portfolios will lose a fortune. Erm, no, actually they won’t. The complete opposite is likely to happen. Most have no need to panic sell! They will sit and wait for prices to recover (which historically always happens). Whilst they do this, many with spare cash will take advantage of the situation and snap up extra properties at a much-reduced price and make even more money in subsequent years.
So, to conclude, a housing crash would be an absolute disaster unless you are wealthy, and no self-respecting socialist should be hoping for one. A significant building program of new eco-friendly properties of varying sizes all over the country which will lead to a gradual easing of prices over time is required, as well as government measures and taxation policies to support people.
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