Press Release Summary: Synopsis of today\'s debt spiral in the UK, asking some deep and searching questions of the free market economy.
Press Release Body: The UK continues to feel the ever increasing grip of the credit squeeze! Sound familiar? It seems we are back in a very similar situation to the 1980\'s where tens of thousands of people were going bankrupt and/or losing their homes.
Over the last two decades we have seen record sustainable growth and low inflation. Or have we? This is what Government statisticians would have us believe, but is it just spin and hype? What about the great panacea, property?
For years now we have been told that we must get on the property ladder before its too late and that prices would spiral beyond our reach. But who really controls the prices? The estate agents, money lenders, solicitors and conveyancers, as well as the Government would all have us believe we continue to be better off as prices rocket. How?
This is not a trick question and all of us know of people or organisations that have made a great deal of money from investing in property. But does it really benefit the average working man or woman? There is a simple example that should help you determine just how much gain you have made from your property value, if you happen to own it.
Imagine for a second if you will that there are two identical semi-detached homes and you won number 2. For whatever reason, you decide that you want to move next door to number 4. The house is identical, the value is the same, the mortgage amount is the same, there is no work to be done and nothing to replace; repair or purchase once the house has been bought. If you take into account estate agent fees for your sale, conveyancing costs for the sale and purchase, Stamp Duty (assuming you are over the threshold), moving costs (again assuming you are unable to do the move yourself, it may cost you anything up to £10,000 or more to move. If everything else remains the same, how have you made any money?
As stated, this is not a trick question, merely an observation of how a vastly overrated property market can leave people a lot worse off than they first imagined. Take another look at our example above. Out of those involved in the transaction, who are guaranteed to make money? The estate agents, solicitors or conveyancers, the money lenders and the Government. And who did we say were persuading you to keep moving up the property ladder? Could it be those same people? Is this purely coincidence? Or could they have an ulterior motive, like huge bundles of cash income, for making you believe the same?
Property is almost always as good an investment as it gets over a long term, if you can buy at a reasonable price and are not dependent on interest rates remaining stable for the duration. It should NOT be viewed as a get rich quick scheme as many have found to their cost. Unless you can guarantee to buy and sell at the right price, it is quite possible you could actually lose money in the volatile property arena.
Most people who make vast amounts of money from property generally do so because they bought when prices were a lot lower in relation to income. They did not have to borrow up to 10 times joint income just to try and buy their first home. A lot of them downsize, i.e. move from a large expensive property to a smaller cheaper one, or relocate to a less expensive area. Neither of these options is very appealing to a vast number of home owners.
Now that interest rates are beginning to rise and the market is stagnating, prices are showing signs of decreasing. What will happen to the vulnerable, particularly low income first time buyers who are already struggling to keep afloat? Will we see another market collapse as bad as the one in the 1980\'s? It remains to be seen. One thing however is certain, if people continue to allow themselves to be duped into a false sense of security because they own their own home, there are likely to be a great many casualties.
Sanity has to return to the housing market for it to thrive. With dwindling resources and greater demand, there is likely to be pressure for ever increasing prices. How much are we prepared to pay, not just in monetary terms, to have our own homes?
2022
