Provocative stuff from Fraser Nelson in the Spectator – casting doubt, as he does, on that ultimate Thatcherite aspiration, home ownership:
- “In her seminal book The Anatomy of Thatcherism, Shirley Letwin famously argued that home ownership released the ‘vigorous virtue’ and made someone more inclined to see the world from a Conservative point of view. The Thatcher right-to-buy scheme (opposed by Labour) was a huge success – emblematic of her bond with the working class voters. It was a success from which the Tories have never recovered.”
Nelson’s argument is that property booms have been exacerbated by government policies, doing great damage to the economy in the process:
- “Conservatives on both sides of the Atlantic have pursued home ownership… with mixed results. The Bush government was much taken with this (I once saw Karl Rove quote aloud from Letwin’s book) and hawked underpriced debt. Mortgages were given to young couples who had not a cent of deposit and no means of paying the money back. The subprime crisis was born. We all know how that movie ended.”
Nelson goes on to suggest that young people are now deliberately staying away from the housing market – and, refering to George Osborne’s help-to-buy scheme, says that we should do nothing to tempt them into what could be a trap:
- “It’s not hard to understand why teenagers growing up in houses that have lost a quarter of their value will be more suspicious of the idea of house ownership as a no-brainer financial investment.
- “It’s nice to own your own place. But how much borrowed money would you risk in pursuit of that goal? How sure can you be that another crash is not just around the corner? And what happens, even up north, when rates head back to the 5pc norm?”
Is the reluctance of today’s young people to become homeowners a mere matter of high prices, stagnant wages and tight credit? Apparently not. There’s also polling evidence of a change in basic attitudes:
- “MORI has been publishing fascinating research into the attitudes of Generation Y, the under-31s. They are the least likely to recommend that a young couple buys a house. And why? This question does not involve affordability (homes are, anyway, as affordable as they were ten years ago outside London). They seem unconvinced that it represents a sound long-term investment.”
This could be bad news for the Conservative Party. It, is after all, a well established fact that home owners are more likely to vote blue. Yet, many other countries with lower levels of home ownership still manage to elect rightwing governments and maintain prosperous market economies:
- "…the majority rent in Austria, Denmark the Netherlands, Korea, Sweden and the Netherlands as well as France and Germany. All of these countries get along just fine.”
Thus Fraser Nelson concludes on an optimistic note:
- “…if young Brits prefer to rent, then there’s no reason they should not get along fine too.”
Ah, but here’s the problem: Renting in this country, especially London and the South East, is much more expensive than in, say, Germany. A shift away from home ownership may increase the supply of rental properties, but it may increase the demand for them too. Unless we build more homes, whether for rent or purchase, young people will be paying more for less and with little left over at the end of the month to build up assets of any kind.