The country is divided in many ways. High up on this list of divisions, perhaps even in the top five, is the one between people who have bought the property they live in, and those who rent it.
This gap is wider and growing at a faster rate than you would guess. The average deposit saved to buy a house is now £33,000, according to Halifax, compared with just under £18,000 nine years ago.
ONS figures put average rent rises at around 2.5 per cent a year. Mortgage repayments, thanks to lower interest rates, are low and heading down – especially if you are an equity-rich, older homeowner. The average monthly mortgage repayment is £542, compared with an average monthly rent of £746 outside London, according to Homelet.
So the deposits required to buy are getting bigger, while the rents – the outgoings that stand in the way of saving for a deposit – are getting higher, and those already on the ladder are enjoying much lower outgoings than those struggling to reach it. This is all the wrong way round.
The financial crisis and lending policies devised as a result are behind this topsy turvy-ness; rewarding the already equity rich and penalising the have-nots because they pose a greater lending risk.
But another big fat reason is the now culturally dominant idea that residential property is primarily an investment you happen to live in; an asset class, rather than a place in which people find shelter, comfort and security – a home.
Buy-to-let landlords are not alone in this viewpoint. Savers, in the absence and (suspicion) of other reliable investments such as pensions or ISAs, and influenced by the apparent indomitable rise of house prices, are increasingly viewing their own home as an investment. They’ve put so much into property over the years, it’s now all they have.
The athlete Sally Gunnell, a woman you’d think might have a financial adviser or two, said in The Sunday Times this week that she viewed her Grade II listed six-bedroom home as ‘our retirement’.
I’m not saying my heart doesn’t race a little faster when a lender tells me my own home has gone up in value by almost 15 per cent in two years (really). But it also feels a bit odd and more than a bit wrong for the house to have been doing nothing at all – merely existing – in order to do that.
Lately, new property investment platforms have taken this idea of homes as pure investments and notched it up a gear.
The Property Partners website says it is the UK’s first stock exchange for residential property. It invites shareholders to buy and sell shares in homes across the country ‘at the click of a button’, giving liquidity and a kind of technologically-primed, hassle-free experience that traditional buy-to-let landlords, with their broken boilers, broker fees and void periods, have long desired.
Here’s what Property Partner members are tweeting. ‘Join me by #investing in #property at the click of a button and earn £50 cashback by using this link: http://share.propertypartner.co/x/HbwkIE @prop_partner‘.
Such a service might have some potential advantages for tenants over unregulated amateur landlords and letting agents. By treating residential property in the way an investor would any other asset class, such a system might result in more security of tenure in a property in which shares are constantly being traded, rather than one at the whim and mercy of a single landlord, who might sell up at any point. There could also be more certainty over rent rises and a more professionalised approach to repairs and maintenance.
But Property Partners, in its efforts to professionalise the trading of shares in residential property, neglects to mention what these investments are supported by: demand from human beings, who might have hard jobs and demanding families.
There is a casual view in this country that there is always more than enough demand for residential property to justify the price increases (the old ‘they can only fit so many houses on this island’ argument).
That might be true, but residential property as an investment in its current form is not sustainable. The property market is an upside down pyramid, with a growing bunch of investors at the top (whether that’s in their own home or in buy-to-let), supported by an ever stretched base of renters and first-time buyers stuck on the bottom rungs. It is a lake, with a multiplying quantity of fisherman gathered around it.
The Government has at last made moves to put the brakes on property being the investment choice of the masses.
From this year, it is ending mortgage interest tax relief for higher rate taxpaying landlords, increasing stamp duty and removing the automatic 10 per cent a year ‘wear and tear’ allowance, which will all make a big dent in landlords’ profits.
These moves are not a moment too soon, but probably not soon enough. Landlords could end up clobbering tenants with rent increases to pay for it all.
The financial crisis of 2008 was caused by poor people reneging on their sub-prime mortgage deals. It is not a huge mental leap to imagine another similar chain of events occurring, caused by tenants being unable to meet their rising rent repayments.
Such tenant defaults would result in lower returns for landlords. Some landlords may not be able to withstand such a decline in income on top of the Government tax cuts, and will choose to sell up. They could be forced to default on their buy-to-let mortgages. Or a combination of both.
With the outlook for the whole economy, not just property, looking so uncertain, the growing number of property crowdfunding websites does not sit well. They create a distance – a layer of tech and slickness, which seems to clean things up, but actually just increases the number of fishermen around the lake, all vying for an increasingly forlorn-looking stock.
Rebecca O’Connor is the founder of Good With Money and a former financial writer at The Times