In Which I Make Swear (And Then Another Swear)

I actually find the whole PRISM surveillance thing quite comforting, as it is nice to know that someone reads this blog, even if they are a bored CIA operative. Anyway, hello bored CIA operative! Is it fun reading bad jokes about how we’re all being spied on?

But I digress. I am on the verge of stopping writing anything, I have to admit, partly because it has only really just properly occurred to me that there is no longer any point on offering analysis or views on the housing market.  Like pretty much the rest of the (world?) economy now, there is no rational analysis possible. All you can really do is try and predict what the executive is going to do next. How this differs from the planned economy of Soviet Russia, I’m not sure (other than the milder weather and lack of large-scale building). You cannot balance demand/supply, wage growth, mortgage finance etc, put them in a model and say “house prices next year will be X” as it doesn’t hold any relation to any of these: it is down to what bat-shit crazy schemes the government will put in place, what heights of insanity our fiat-currency driven debt –fuelled death-spiral will reach, and how successful Carney is going to be in getting the Bank of England back on track to its original New Labour purpose, which is creating a massive housing bubble before the next election.

As a renter, I must admit it is hard to know what to do. Our economy is splitting into a classic rentier/worker stratification, comrades. There was a great example of the “winners” in the house I surveyed two weeks ago, the vendors then asked us to survey the new house they were buying. He was a brickie, she was a primary school teacher who had stopped working recently, at 50. They bought their east end terrace house for, I would think, £50-60k a few decades ago. They sold it last month for £2 million. They then bought a new rather palatial house (in Hove) for a million, and had a million left over in cash, tax free, and are both taking up golf.

Or another example: I met a couple in their 50s, both professionals, who are letting out their house that they bought – again, a few decades ago – and spend their time sailing their yacht, having no need to work anymore. The rent pays their living costs, they put money aside for the future and their mortgage is slowly being paid off – the property will then transmute into their pension.  They let out their house to a couple in their 20s, who, again both professionals, cannot afford to buy a house of their own, even though they both work full time in good graduate jobs, and because rents are so high, they cannot afford to put anything away for the future, or think about pensions etc .

I have no interest in concepts of fairness. I really could not care less about whether something is “fair” or not, and I personally think that the word should only be allowed in debates in playgrounds: but is this efficient? Is this really the most efficient way to run an economy? Really?

If wage growth is declining rapidly and house prices are going up, does that indicate a healthy economic system that will grow steadily over the coming years, providing gains for all? Or is that a sign that things are going wrong somewhere, and QE and 0.5% base rates are creating massive imbalances that are building up and which will at some point have to burst over the masses, like a…thing? (I can’t think of an analogy that won’t make the CIA operative feel queasy, and it’s still early in the US.)

So back to the being a renter conundrum: do we buy, given that Osborne is about to stoke up the property market by a good 30%? To quote Chuck Prince, former banker, whilst the music is playing, should we not be dancing? Or do you look at things sensibly and say: this is totally fucking mental, why would we borrow £400,000 from a bank to buy something which is potentially going to be worth half that in a few years, even if it goes up in value in the short term?  What will happen to house prices when the 80% of the over 50s who plan on selling to fund their retirement dump their houses on the market in the next five years? What will government do to stoke up prices then – negative rates? £1 trillion of QE?

So two weeks ago we bought a yacht. Fuck it.