Six years ago, only a few months before Northern Rock collapsed and the world plunged into a financial storm from which it still has not properly recovered, I met Alex Rossiter, a 29-year-old freelance radio producer, in the basement kitchen of
his parents’ house in Hackney, east London.
His father, Alan, a community arts worker, told me how he had bought the house for £9,300 in 1977 and that now “it’s probably worth £500,000, if you can believe that”. Actually, I told him, it’s probably more like £800,000. At which point, he nearly fell off his chair.
But then this was May 2007, and I’d spent a fortnight tramping up and down his road, knocking on doors, asking strangers intrusive questions about their personal lives. I was trying to build up a snapshot of how Britain’s super-inflated housing market had affected the people in a single, randomly chosen London street.
At that moment, house price inflation seemed deranged, unstoppable; headline after headline documented the rising prices; nationally, values were up 10% year on year. In London, a single house viewing could draw 200 people and result in 10 sealed bids at the end of the day. And everyone I spoke to, both the winners and losers in the great British property lottery, wondered: how could it go on? Where would it end? Where was the money coming from? We know the answer to that now, of course. Global economic meltdown and the biggest collapse in house prices in two decades.
Six years on, though, in London at least, but by no means all over the country, the headlines have returned. London asking prices increased by 10% in a single month, according to Rightmove. Which means, as one commenter put it, that every minute the average London home is increasing in value by “the price of a Subway sandwich”. And this could be just the start. The government’s Help to Buy scheme, attacked by everyone from the IMF to former Bank of England governor Sir Mervyn King, is widely expected to pour political booster fuel into an already hyped-up market just in time for the next election.
That 2007 mood? It’s back. And so is what Anne Currell, the co-owner of Currell’s estate agency, a mini-chain, based in north and east London, and who happens to live on the street I picked, calls “the slightly unreal feeling of it all”.
The street was Albion Drive in E8, and I chose it randomly — an inner-London everystreet made up of family homes and 60s in-fill, Georgian detacheds and a council estate. But the super-gentrification that has benefited Hackney has meant that it turned out to be a more exceptional case than other streets in other boroughs.
Albion Drive is hop, a skip and a jump from what has become London’s Silicon Roundabout technology district; another hop, skip and a jump from London’s new nightlife central, Dalston, both of which have emerged in the six years since I wrote the original article.
It turned out to be an extreme case: a hyperbolic exaggeration of a London street, where some have made millions and some struggle to cover the rent. But in this, it is perhaps a bellwether. Even six years ago, there was a staggering wealth gap between those with property and those without; in Albion Drive, it’s now an unbridgeable chasm. This is the rest of Britain, potentially, a few more years down the line.
Have prices really gone crazy again, I ask Currell, or is it just media exaggeration? She sighs and repeats what she said earlier. “There’s just this slightly unreal feel to what’s going on. Even for an estate agent, it’s not hugely pleasurable.
“You think it’s easy, but actually when you put a house on the market and there are four or five people who want to buy the same house, that’s not particularly satisfying. And how sustainable it is, I don’t know. But the fact remains there are not enough properties being built in London.”
In 2007, it didn’t seem possible that prices could keep on rising. And yet, despite the crash, she estimates that prices in the street are 65% higher than they were at the so-called “height” of the boom.
She bought her house for £170,000 in 1986 and in 2007 told me that it was probably worth £1.2m. “Did I say that? Well we’re just having some work done on it, and when it’s finished I think it’ll be worth around £2.4m-£2.5m, so that’s actually a 100% rise. But it’s a very specific product.”
By which I think she means that it’s what non-specialists might call a bloody nice house: double-fronted with a massive garden. In 2007, it seemed impossible that prices could continue going up because, in the absence of wage increases, how would first-time buyers be able to borrow any more? The answer is that, in the past six years, first-time buyers have changed: “There’s always two of them now. It’s two people buying a one-bed flat together. That’s around £350,000 and at least one of them, if not both, will be getting help from parents.”
And then there’s the overseas market. “That’s the other change: 70% of all London newbuilds are sold to foreign buyers, which we play a small part in.” There’s a perception that this affects only prime central London, but she says: “Even we have a China desk now.”
Six years ago, I’d found every sort of person and every sort of housing story in Albion Drive. People like George Vassiliou, who bought his council house with Right to Buy a decade earlier for £39,000 and had just sold up for £565,000; first-time buyers like Dan Massie, 25, a town planner who’d managed to buy a one-bed flat for £265,000 with his girlfriend because of “massive help” from their parents; young renters such as Jodie Banaszkiewicz who, with two friends, was paying nearly £1,500 a month to rent an ex-council flat on an estate at the end of the road; and academics like Rosemary Stott, who had seen her house treble in value in a decade. She was a film lecturer who told me she taught a course on film in the hyper-inflationary Weimar Republic “and frankly, this feels quite similar”.
Six years on, the winners have just won more; the losers are just ever further away from being able to afford their own homes. Alan Rossiter says “it’s absolutely nuts” when I talk to him about the price of his home now, but he doesn’t have quite the same sense of shock and awe that he had back then. Even when I point out that a similar-sized home to his recently sold for £1.25m. “I know it’s just crazy. But we love living here. It’s a house to us. It’s our home not an asset.”
In 2007, his son, Alex, said, frustrated: “I don’t think I’ll ever be able to buy.” Six years on, the frustration has been replaced by an air of quiet resignation. He’s 36 now and a press officer for the TUC. He rents a flat with two friends in north London.
“I’m in the same position as a lot of people. I’ve got a professional good job, and earn a decent salary, but unless you have considerable savings, actually buying somewhere is an incredibly distant prospect,” he says.
“I’ve almost reconciled myself to not buying any time soon. I’m 36 and I don’t think it’s going to happen by the time I’m 40. But there are people in a lot worse situations than me. I’m lucky, I enjoy my job, I’m happy, and I live in a nice part of London. I have a decent quality of life.
“But I’d always assumed that I would have my own place, that I would have children. You review that as you get older.”
Some of his friends, mostly those who have had parental help, have managed to buy. “And I don’t resent them for that at all. But there is an asset gap that’s opening up between those who have and haven’t managed to buy. I don’t think there’s resentment about it. I just think that people want to settle down and maybe have a family and that’s become incredibly difficult. It’s hard to plan a future in short-term rented accommodation.”
That rising house prices take money from the young — and as Martin Weale, the director of the National Institute of Social and Economic Research said last time, “the not yet born” — and gift it to the old has, at least, become a mainstream school of thought since I wrote the piece in 2007. The issue of intergenerational fairness is now on the political agenda, even if nothing has been done to address it — although Jonathan Portes, the institute’s new director, tells me that he believes it’s somewhat overstated.
“My sympathy for young graduates whose parents own a house is somewhat limited. Old people die, and you can’t take it with you. It’s young people who haven’t been to university, who haven’t got the qualifications, and who, if they live outside of London, won’t be able to afford to move to London. It’s people who aren’t going to inherit. And that’s why rising house prices are inequitable and regressive, and socially, in all sorts of ways, a bad thing.”
He’s right: Alex might inherit, some day, though it’s not much use to him now. The children of the council and housing association tenants in the street will never have even that distant hope. And the vast wealth gap opening up between London and the south-east and the rest of Britain means that it’s not just social inequalities that are being widened — by the price of a Subway sandwich a minute — but also geographical ones.
Homeowners in London can, at some point, exercise the option of moving to a cheaper part of the country and reducing their mortgage, or using their equity as a pension or as start-up capital for an artisanal bakery, or whatever. If you live in a cheaper part of the country, tough. There are jobs in London, and many young people aspire to live there, but as a bunch of students from the Midlands told the Guardian last week, the idea of paying the capital’s extortionate rents is simply “scary”.
If you have a decent job, you can at least afford the extortionate rents. At the end of the road, I meet Dan (not his real name) who’s 38. He rents a flat with his girlfriend in one of the council blocks and they’re stuck in a flat-baby dilemma. “We can afford to buy something, somewhere using both our salaries, but we want to have a baby, so …,” and he shrugs his shoulders.
“I’m old enough to remember the last crash and I always thought there had to be one and it couldn’t carry on. But then the government pumped loads of money into the banks, and propped it up and now it’s worse than ever.”
Dan’s friends who bought “are loaded, basically”, he says. “That single fact is going to affect the rest of our lives. They will always be rich and have options; I will probably be quite poor, with a massive mortgage, and won’t.
“And to be honest, it’s the ones who started off rich — whose parents could afford to give them money — who are now in nice houses and all the rest, and the ones whose didn’t, aren’t. It’s got less to do with how successful they’ve been professionally, than with the fact that they had help with a deposit at 25.”
He’s still one of the lucky ones, though. A report last week gave the staggering statistic that two in five private renters in London are living below the poverty line.
But then, the whole paradigm of home ownership has changed in the capital. “London is now a minority home-owning city,” says Toby Lloyd, an analyst with Shelter. “And levels are falling fast. More and more people are in unstable, insecure tenancies.” And while London is “particularly acute”, he says, “house prices are higher now than in 2007 in every region of the country. There are really bad hotspots all over the country. We looked at asking prices compared with average wages all over the country, and only 2% of properties were available for those on an average wage.”
Is it a short-term bubble? Neal Hudson, a housing analyst for Savills, refers to the “potential for irrational exuberance” but also says his company is about to revise its five-year forecast of house price inflation (18% in the UK, 25% in London) upwards. He adds: “There’s one particular piece of data that has started to worry me. The loan-to-income ratio for first time buyers is higher than it was in 2007. They’re borrowing even more than they were then.”
The story of Albion Drive was a snapshot in 2007. In 2013, it feels more like a prophecy. A decade ago, the wealth gap between its home owners and council tenants and private renters, between its older residents and younger residents, was pronounced but not insurmountable. Now it is.
I chat to Robin Murray, an economist living in Albion Drive, whose specialist subject is co-operatives. He calls home ownership “the absolute plank” of inequality.
Six years ago, he told me that house price inflation had a parallel in the great political struggle of the 19th century over the price of land — how parliament was composed of landowners who introduced legislation such as the Corn Laws for their own benefit. I tell him how that stayed with me. And he’s kind enough to say that what I wrote has stayed with him too: that Britain is now two classes: the landed, and the landless. Private renters, council tenants, those who don’t have parents to bequeath them a house: they are the new peasant farmers, locked at the bottom of society with no escape ladder to climb.
Neo-serfs, I called them then. The name didn’t stick, obviously. But, who knows: maybe its time will yet come. Read the piece. I never say that. But six years on, it feels just a bit uncanny.
This article originally appeared on guardian.co.uk
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