Want to buy houses for fun? Stick to Monopoly
Our fascination with house prices and desire to buy second homes fuelled the property bubble. And we know how that went, writes Michael Wolsey
Published 21/10/2013 | 09:00
First the good news. House prices are moving up at last. A year-on-year survey by the Office of National Statistics (ONS) has shown two consecutive increases in Northern Ireland for the first time since 2007.
So, if you're trying to sell a three-bedroom semi in Belfast, you'll probably get a bit more for it than at this time last year.
Now the bad news. House prices are moving up at last. So, if you're trying to buy a nice little bungalow near Bangor, you'll probably pay a bit more for it than at this time last year.
You gain on the swings and lose on the roundabouts, because, when you sell a house, you need to buy another one and the same market force applies.
A house, after all, is for living in. Well, that's how it used to be. When did it change? Ten years ago, 15 maybe.
That's when lots of us suddenly decided that a house wasn't just for living in. It was an investment you could rent out for other people to live in.
Why have just one when you could as easily own two, or three? One here, one there and another one abroad.
So what if you couldn't find a tenant? A house was still a sound investment. Sure everyone knew the price of property only ever went up. You bought the second house with money borrowed on the equity of the first, which had jumped in value.
Yes, those were the days, my friend. At the height of the boom, my wife and I went to a sale of foreign properties in a city hotel.
People were buying here, there and everywhere with a kind of crazy desperation, as if they might miss the boat and be left the only family in their street without a holiday home; objects of ridicule from more savvy neighbours.
At the top of the market were houses in California, then France and Spain. People were buying in South Africa and even in Shanghai. The lowest prices were for apartments in Bulgaria and they, too, were being bought, unseen, straight off the plans. People were putting down deposits on homes that had not been built, in a town they had never heard of, in a country they had never visited.
I am not scoffing at these people. We nearly bought one of these apartments, until we asked ourselves how often would we really want to holiday in Bulgaria.
We could rent it out, said the sales assistant, and it would be a good investment.
That argument seemed convincing, but, luckily for us, Bulgaria was just a step too far and we shied clear of a development which subsequently turned into an unfinished disaster.
It was the insatiable hunger to buy which created the housing bubble. We have, in this country, a dangerous fascination with house prices and a deeply ingrained desire to acquire property. Because this attitude is prevalent throughout all of Britain and Ireland we take it as normal, but that is not true.
In France, half the population lives in rented accommodation, compared with about 36% in the UK.
The figure is even higher for Germany, where 61% of homes are rented.
Germans also have a practice of spreading home loans across two or more generations – you inherit the mortgage along with the house – which spreads the burden of payment and ensures that family homes do not get confused with vehicles for investment.
Few Europeans share the British preoccupation with owning a home, saving up for a deposit and struggling to pay off a mortgage.
They do not confuse the business of property investment with the need to put a roof over their own heads. And they have never shared the blind faith in the ever-rising value of property which prevailed here until the bubble burst in 2007.
Since then, the price of housing in Northern Ireland has dropped by around 50%. Many mortgage holders are in negative equity and properties bought for investment lie empty in every town.
You might imagine that a decline of this magnitude would cure us all of the property bug. Not so. The latest price survey has sparked great interest and the increase has been greeted with satisfaction.
The only complaint seems to be that prices in Northern Ireland are not rising as sharply as in England, where the average annual growth of more than 4% is four times greater than here.
Our response, though predictable, is puzzling. House-price increases are bad news for first-time buyers and of no real benefit to anyone else – unless they are planning to sell up and live in a hut on the top of a mountain.
Or unless they see property as investment. In which case, let the buyer beware. It's a risky business and one most of us would be wise to avoid.
Houses should be for living in, not investment. If you want to play games with them, stick to Monopoly.