Hugo Rifkind

Why we should fear the new housing bubble

17 August 2013

9:00 AM

17 August 2013

9:00 AM

It’s senseless to ask how things are going to end, because things as a general rule don’t. They rumble on, they morph, and yesterday’s drama becomes tomorrow’s eyebrow-raising justification for thinking that people used to be inexplicable idiots. Nonetheless, I read these stories of house prices rising again and I cannot help but wonder. How is it going to end?

How is it even supposed to end? What is Mark Carney’s golden future? Interest rates stay low, repayments stay low, house prices keep going up and then… what? How do all these people who have overextended themselves eventually underextend themselves so as not to be utterly buggered when rates finally go back up again? What is the correct verb for underextending yourself? Is there one? Have they even planned for that?

Presumably it’s all about inflation. Presumably the idea is that mortgages grow and grow, pound for pound, but that’s going to be OK because each of those pounds, eventually, will be worth much less. Right? So, when your £200,000 mortgage is actually worth no more than, say, 200,000 Zimbabwe dollars were worth in 2009 just before they scrapped them (basically nothing: a grain of salt, a pinch of sand) then the debt has gone and you’re laughing. But what about everybody else? What about all the other stuff you have to buy in the interim? I mean, Christ, what sort of plan is this?

Never mind the savers, because I increasingly think they’re a mythical construct; something everybody has heard about but nobody has ever seen with the naked eye; the griffins, rocs and hippogriffs of the financial world. What about all the people who simply have to buy houses between then and now? Because it’s not like everybody is just going to take a breather from being alive for a couple of decades while this inflation does its magic, is it? No. Inflation goes up and up, and house prices go with it. And everything just gets worse.

My perspective on this is skewed, obviously, with my being metropolitan London scum etc, and thus having had the enormous privilege of spending ten times my annual salary on the sort of charmingly ramshackle pile of bricks that a Yorkshireman wouldn’t keep his pigs in. Houses in London are so expensive these days that the mind somewhat boggles at the thought that there are actually enough rich people around to buy them all. And of course there aren’t. It’s all debt. That special sort of debt that is perfectly serviceable and safe just so long as nothing whatsoever changes at all.

My experience, though, is everybody’s future. House prices are soaring everywhere, aided by the low interest rates we can’t afford to change and the government’s bizarre, cynical help-to-buy scheme. Home ownership, once seen as a ladder out of poverty, has become a millstone of the middle. It’s where all our money goes, meaning that it can’t go anywhere else, meaning that we grow ever richer on paper, but with nothing left to spend. Monetary sadhus we are, balanced precariously on piles of borrowed cash.

I mean, look, I know I’m an idiot. And I know that I give an impression of even greater idiocy sometimes, by writing conversationally about the sort of stuff that convention dictates ought to be only approached in sombre tones by people who write as though they have never laughed or smiled. But I do not understand how this is all going to be OK. Moreover, I don’t see any reason any more to assume that anybody else does either. Brrr. Best of luck.

Border studies

This week, as you’ll probably have gathered by now from the bouncing chests of beaming triplets in vests, is A-level week. So as people across England collect the results that may perhaps send them off to university, consider this: when they get there, they are less likely to meet Scots than ever before. In 2012, Scottish applications to English universities slumped and they have stayed slumped. This year, barely 3 per cent of Scottish 18-year-olds applied to go to university outside Scotland. This compares with around a quarter of Welsh students seeking to study outside Wales, and almost a third of Northern Irish students wishing to do so outside Northern Ireland.

Scottish students, it’s true, have always vastly preferred to stay at home, not least because Scotland has excellent universities of its own. But the numbers are now dwindling into a highly significant insignificance, and for one simple reason. Tuition fees. Today, Scots who cross the border pay £9,000 a year, and Scots who stay at home pay nothing at all.

I’m not one for conspiracy theories. I do believe that when Alex Salmond said that ‘rocks would melt in the sun’ before Scottish students would be asked to pay for their education, his principles were sincere and his political calculations were short term. But this is how neighbours become strangers. This is a whole generation of educated, affluent, middle-class Scots hitting adulthood without experience of England, or close English friends, or a sense of the south being in any way theirs at all. Even in such a world, probably, Unionism can survive as a political ideal. But it will never go to the bone.

Got something to add? Join the discussion and comment below.

Hugo Rifkind is a writer for the Times.

Show comments
  • AndyB

    Buck up, Hugo – if they’ve saved nine grand they can afford to travel south of the border from time to time…. also, they’ll need to if they want a job.

  • ConallBoyle

    No, Hugo, HOUSE prices are not being artificially inflated, the bubble is in LAND prices. So it’s high time that Land Value Tax was brought in to prick this bubble. First move — switch the hated Stamp Duty to L V T at 0.3 %?

  • Eddie

    House prices are way too high anyway, and have not been allowed to fall to their correct levels by politicians desperate for house price rises, which makes people feel rich and thus vote for the party in power. Democracy = bribery.
    The best thing for our economy would be for a government to allow house prices to fall to their right level, and to stop so many foreign investors propping up prices, and to regulate buy-to-letters and second-homers with appropriate taxes, and to bring back rent controls.
    Will it all happen? Nope. There will be a silly spurt in house prices then a big crash when reality bites.

  • chan chan

    House prices have always returned to the average, broken through it, then grown again in every housing bust in history. Except this time. We barely got half way towards the average, and now prices are climbing again. The government interfered in the market with its interventions in the financial crisis (the banks should have been allowed to go bust). When the government interferes in any market, the result is higher prices, whether it’s housing, child care, or ball bearings. The idea that grossly inflated property prices is good for the country is an outrageous lie.

    Housing has now bottomed. We should see gently bullish/sideways prices for a couple of years, then much sharper growth subsequently, as interest rates rise meaningfully. The bank of England WILL lose control of interest rates, as the Fed is now losing control of them in the US despite QE.

    If you are thinking about buying, you’d better buy now, and lock in a fixed rate mortgage. They’re only going up.

    • Terry Field

      Foolishly I thought that a competent government would shift Britain to a productive, export led, high-tech economy with greater equity, respect for talent and skills and a timeframe for reconstruction of vital industries of about 50 years.
      What do we get?
      The same third rate, low aspiration, three card trick, house-price manipulation, short-term opportunism, Reggie Maudlin type economy massage before the coming election, laced with a sneering cynicism for anyone who is skilled, and spends a lifetime working with expertise to produce wonderful results.
      Britain is a governmental sewer, and turds rule.
      The population is ill served, and a real revolt is long, long overdue.
      And stuff PPE at bloody Oxbridge.

  • Maggie Cooper

    the whole of the UK could do with a revamp so why not help us get this competition off the ground, to create more homes etc….& give a break to the new architecture students in UK-

    Cc to MP Ed Vaizey,MP Jo Swinson,MP Maria Miller,MP Helen Grant

    From Margaret Cooper Name of Voluntary Organisation:Media International Foundation VO Number : 347
    Tel 07765927008

    cc; Sir Bob Kerslake- Permanent Secretary,The Rt Hon Eric Pickles MP,Peter Schofield,Helen Edwards CBE,Brandon Lewis MP
    Department for Communities and Local Government, Eland House, Bressenden Place, London, SW1E 5DU

    Dear Tom Broughton

    The BUILDING MAGAZINE is the perfect partner for the enclosed project, kindly get intouch to discuss
    is there a requirement for planning environment to be included in the enclosed competition? kindly forward details please
    Ref; UK Students Design Competitions to run consecutively in each major town and city in UK-(copyright Margaret Cooper 2013)
    requesting government, London Live TV, LeWeb,Angels Den,BBC,FESPA,National Media & all relevant sponsors
    The department for Communities and Local Government is the perfect vessel to implement the proposed project. £430 million pounds wasted in UK’s education 2nd provision, as this amount should go to immediate expense incurred to promote UK’s graduating talent (as it’s blatantly obvious that the lower paying jobs are going to new immigrants, therefore making the 2nd level education provision, useless, as all these immigrants are taking on lower paying jobs, sometimes, most of them have university degrees!leaving newly graduated UK students unable to get any jobs, and without being able to show a career history on their CV’s, recruitment agencies, immediately dismiss their CV’s-I personally heard a top UK Recruitment Consultant at the HR Olympia exhibition, state in a public presentation that the UK’s recruitment agencies are advised to dismiss all CV’s who’s applicant has been unemployed for more than 3 months! (I have been personally been contacting all of the Architecture/Design/Fashion/Art Universities to get them to participate!)

    ‘clusters of expertise can be highly effective in driving new business creation’-I wish to propose a series of UK Students Design Competitions to run consecutively in each major town and city in UK, to provide an interactive opportunity to all architecture/design/fashion/art University students in UK to get involved ‘hands on’ in taking part in a competition to offer their input and participation to provide their prepared Application and present a Cultural Storyboard which will visually translate how they propose to make a creative difference to their area -whether students choose one particular street, a local square, or a selection of shops or offices/exteriors. Collective collaboration to create a series of Design Competitions in each city and town in UK, on ‘Effective productive career education to provide our youths with living their value to the fullest’ To obtain sustained Visibility, Credibility, Profitability and stimulate UK’s stagnant economy. According to the recently published ‘Classifying and Measuring the Creative Industries’ by the Department for Culture, Media and Sport Architecture is the smallest of the new broad creative industry groups, employing 99,000 people.Architecture as a career combined with diluted elements of fashion and art, such as jobs designing TV Programme/show sets, Fashion Catwalks, Music video sets, could quickly transform the career prospects and earning power of all architure students. IT, software and computer services is the biggest of the new broad creative industry groups, with 470,000 employees, according to the paper. Publishing employs 214,000 people while Film, TV, radio and photography account for 205,000 jobs.
    Music, performing and visual arts employ 182,000 people. Advertising and marketing is the next largest with 144,000 workers, followed by Design and designer fashion with 103,000.

    Cultural-to promote cultural diversities and the richness they bring to our national identity!
    Historical-let’s face it, Britain has the most amazing History in the world-let’s show how proud we are!

    Vision, aspirations and priorities for the project-The participating students Cultural & Historical storyboards should demonstrate original ideas to create vivid visual images that are interesting and appealing to all viewers-Re-design, Re-shape your community-help yourself and your friends and family to live in a more stylish, fun environment. The creative industries have been seen to become increasingly important to the UK’s economic well-being, proponents suggesting that “human creativity is the ultimate economic resource,” and that “the industries of the twenty-first century will depend increasingly on the generation of knowledge through creativity and innovation of our UK architecture/design/fashion/art – Makeover Community should be committed to providing you with the practical lifestyle tools and resources you need to live a life that honors your values and most treasured priorities. Communities all over UK could do with a ‘pick me up’ remodelling, just as we provide makeovers for ourselves! Get involved, and promote your talent at the same time. Britain needs more colour, more creative input in where we all live and work. Creative entrepreneurs are different from other people. In fact, their entrepreneurial spirit makes them different not only from others in general, but from other ‘creatives’. This is because not only are they creative, they are also risk-takers, innovators, originators, thought-leaders and product (or service) makers. They use a combination of creative enterprise, market knowledge, business acumen and perhaps surprisingly in some cases, a lack of business acumen to turn creative ideas into commercial outcomes.Creative entrepreneurs are not the sort of people who sit back and react or respond to ideas. They create them. What they do best is to be the first to come up with an idea. But, just as importantly, creative entrepreneurs strive to take that idea further – beyond the workshop, the laptop or the studio – to market, that is, to other producers and to end consumers. By disrupting the status quo, creative entrepreneurs lead by example, blazing a trail for others to follow. By creating a website to show in detail the ‘transformation of student’s participating selected areas, and how they intend for these areas to assist their local community to enjoy and be more productive , “Digital tools are now utterly embedded in the creative process, so we should introduce some areas of IT that are used creatively.”
    This Design competition is aimed at delivering exciting buildings and projects. To drive up quality, stimulate creativity and innovation and generate a range of ideas improving choice and provide a highly successful procurement model that brings out the best in a project – to provide a platform to showcase new and emerging talent.
    Wanted; A Student/Students to create a Website(for which accreditation will be provided on the site, though this offer is on a gratis basis) that will help create an identity for this project. Also requesting consistent exposure and inclusion on all relevant social media as a means for driving interest to participate and become involved thus promote further discussion and engagement with the competition
    to tell the story of what makes the local residents a harmonious multi-cultural location and what improvements and modifications you recommend, and how they can be implemented, by whom and if any sponsorship or product placement can be utilized in the process from major or local businesses. Students can also produce edited Film Footage of which the copyright will automatically be transferred to the local government department in the area the application for the competition if applied too. Groups of youths participating in this competition should find it easy to approach Angels Den to initiate a *Start up company and should be encouraged to participate in LEWEB’s 2013( who shed light on world innovators building the future of the Internet economy. Competition applicants will be encouraged to include their filming coverage (LONDON LIVE, Evening Standard’s soon to be launched TV Station is the ideal broadcasting company to show such a finished production- Launchpad, which will showcase new film-makers from across London-As this should not only encourage the participants of this competition to become competitive but also show ‘London is the City that cares for it’s people’!. The Storyboard should include original illustrations and flats, as well as additional materials such as photos, colours and architecture that have influenced the unique design. The purpose of the Cultural Storyboard is to give all participating student contestants an opportunity to create a storyboard of their original design. It will also provide all participating contestants an opportunity to gain knowledge of their chosen career and the responsibilities that go with it, enhance their creativity and originality, and develop visual communication skills.

    Starting inspiration should be achieved from the Theme ‘Around the World with Technology’=using all local cultures traditions and technology affiliated creativity, to explore people, places, culture and art around the world. Use what you learn about other parts of the globe to inspire your creations-

    Each storyboard must conform to and will be evaluated based on the following;
    Each entry must include either interior design, or exterior design of proposed area/venue/open space/public space, and how their proposed design will add value/harmony/useful purpose for either entertainment/educational scope/sporting facility
    The layout of the storyboard should show evidence of creativity by the participating student
    The layout of the storyboard should illustrate a theme, mood, spirit or an idea, with a strong focal point to include commercial value and career opportunities for the participating student
    Placement of the inspirational items should allow the eye to flow across all elements of the board without distracting from the design
    Additional photos and other materials can be used to show the inspiration for the design. These additional materials should enhance the storyboard without taking away from the original design
    FESPA is the perfect business partner to advice, provide sponsors to produce the advertising materials for all of the Exhibitions/Competitions

    *Each Town/City shall appoint a designated point of contact-Competitions work best where there is a clear delegation of tasks and responsibilities, with a designated point of contact within the client group who is able to respond to queries, pass information on internally, and make key decisions as required.

    Full binding conditions will be agreed at a later stage, as and when all particaping Towns and Cities have met and agreed on all relevant terms and conditions. The competition conditions will provide clear instructions about the submission method and what information the competitor must submit. The aim will be to ensure the design submission is enough to explain the design without over-elaborate or excessive work. It is worth noting the following:
    > a time and date deadline for the receipt (rather than dispatch) of entries. The onus is on the
    competitor to make sure their submission is received on time
    > clear competition conditions that the organiser will not accept late entries, or any
    submission that is delayed in transit
    Submissions that ignore the rules should be disqualified
    Students/teams will be allowed some latitude in terms of what they choose to present, as there will not be an overly
    Prescriptive requirements for entry into this competion; this can be an important means of assessing their ability to communicate
    design ideas to members of the judging panel and the general public.
    In a competition, designs are generally only ever developed to outline proposal stage.
    The benefit of this is that the winning design can then be developed with the client

    The basis on which applicants will participate in the competition.
    Setting out clear conditions at the outset will not only benefit the participating Towns,Cities and sponsors, but it also ensures transparency and fairness for competitors-the project’s scope, budget and potential, clarity on the competition conditions which will
    influence the level of response from the design community. Conditions will cover:
    > Who can enter / eligibility
    >Client priorities
    >Post competition commitment
    >Judging process including selection criteria
    >Prize money/honoraria
    >Submission requirements

    Each town/city group of participating students, shall design and produce/manufacture, a Bracelet Charm that depicts the historical/cultural identity of their area, and proceeds from sales of these Bracelet Charms shall go into a fund to cover next year’s Annual UK Students Design Competitions

    Quality of workmanship-storyboards should be neat, and demonstrate quality
    Consistent theme-all elements must be cohesive and support the design brief
    Each participating Town will provide an exhibition venue and cover the costs for the competition-provide media coverage, encourage local chamber of commerce to provide sponsorships for their business members, and amalgamate the results to provide a TV Programme (the BBC is the ideal broadcaster for this, to show the UK’s audiences, that they do care what happens to our UK youths)
    to promote UK’s creative talent-

    -The selected professional judging panel will reflect the subject of the competition and the design disciplines sought.
    Judges will be selected from the Design/Architecture/Media/Art/Fashion industries
    > formal announcement of results/prize giving-The elimination process will take place over a period of 1 month, culmination in a televised London Awards Finale, where sponsored prizes/placements/internships will be awarded

    Exclusion – members of the judging panel, the client body and the competition organisers and also extend to members of their family, close business associates and employees will be excluded from entering or assisting a competitor with their submission.
    The judging panel will assess each submission against the selection criteria. It is
    important to ensure that comprehensive notes are taken as part of any assessment, to
    not only provide a record of the decision making process, but also to be able to provide
    feedback to unsuccessful applicants. It is good practice to give feedback providing
    applicants with an opportunity to learn about the relative merits of their submission.

    In all related interviews the following guidance is worth noting to ensure fairness to all competitors:
    > Ideally the interviews and reaching a decision should happen over a single day. Where the number of competitors means this is not feasible, interviews should be held over consecutive days
    > Interview slots are generally allocated at random, unless the geographic location of a competitor makes it sensible for them to be interviewed at a particular stage in the day’s proceedings
    > Where appropriate, all teams may be issued with areas on which clarification will be sought ahead of the presentations
    > Competitors should be allocated an equal amount of time in which to make a presentation, and be
    given an equal amount of time in which to answer questions from the judging panel
    > Competitors should know the format of the presentations in advance, the time available, the maximum number of people who may attend, and the IT equipment available
    The proposed exhibition will give interested parties and members of the public an opportunity to
    comment on the design proposals. Exhibitions are a great way to consult, engage and
    involve a wider audience. General points to note are:
    > The conditions should state if short-listed design proposals are to be on public display prior to the
    selection of a winner
    > Design proposals are often displayed anonymously so that people are not influenced by the reputation and profile of any particular designer
    > A summary of comments arising from any public consultation can be made available to the judging
    panel to help inform their decision making
    > A website gallery can be an excellent way to showcase design proposals

    I look forward to hearing from you all soon
    Yours sincerely
    Margaret Cooper