Home Owners Bitter as Market 'Double Dips'
Pepinster, Catherine, The Independent (London, England)
YOU THOUGHT it couldn't get any worse? It has. The housing market has gone into "double dip" recession. Two years ago, it seemed as if the market might be improving. After the lengthy slump which followed the 1988 peak, it stabilised in 1993 when interest and mortgage rates were reduced. People started to think again about moving house, and prices even nudged up last year.
But the recovery was short-lived. Even though the economy has continued to grow (albeit recently at a slower rate) all the indicators - sales, prices, and mortgage advances - are now tumbling down again, in some cases to levels that are lower than ever before.
"It's a double-dip," economist Rob Thomas of leading brokers UBS said yesterday. "In terms of sustained nominal price falls, the 1990s recession is now the worst of the post-war era."
The clearest evidence of the market's problems came last week when building society figures showed home loans had reached their lowest levels since 1979. MPs from both sides of the house joined housebuilders and lenders to call on the Government to provide practical help to restore confidence.
"The housing market is in meltdown," said Sir Michael Latham, former Tory MP and adviser to housebuilders.
How did it get this bad? The blame can be laid squarely, first of all on Norman Lamont, and then on Kenneth Clarke, who not only increased indirect taxes, but targeted owner-occupiers on two counts. Cuts in mortgage interest tax relief announced in the 1993 Budget were the first blow to the fragile housing recovery. Then came rises in interest rates last year. For people already fearful of losing their jobs, taking on a mortgage, or a bigger one, was no longer an option. Now, with income support for home owners who lose their jobs being restricted, lenders expect even fewer people to want to buy a home.
First-time buyers are the elusive breed who could help kick-start the market. At the height of the housing boom, people as young as 21 were buying to get on the property bandwagon. Now the average age of the first- time buyer is 28 to 30.
Pity the poor home owners. Mortgaged to the hilt on a house with negative equity, they are encountering stress levels the pampered post-war generation has rarely before experienced. For people like Steven Aylard and his wife Susie, the lack of first-time buyers means they continue to live their lives in limbo. They each have a one-bedroom converted flat: Steven's in Herne Hill, south London, and Susie's across the capital in Kentish Town. Neither can find a buyer. Now the couple have a baby, they have had no option but to rent a house. "We can't plan our future, get the home we really want," said Mr Aylard.
When he first put his flat on the market in 1990, he was told by his estate agent that it was worth pounds 65,000. There was some interest in the flat 18 months ago, but he has still been unable to sell it with the price reduced to pounds 50,000. Susie's flat is for sale for pounds 70,000, although she has a mortgage of pounds 75,000 and expects agents and conveyancing fees to cost several thousand pounds. The couple now spend their time negotiating with three sets of managing agents; one for each of the flats which are rented out, and another for the house which they have leased. "We're living in a house without our own furniture, worried that the baby will be sick and ruin things," said Mr Aylard. …