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Saturday, October 04, 2014

Generation rent - priced out

The headline in the I - newspaper yesterday was "Generation Rent"- blocked from the property ladder.

Clearly, the I are speaking to some of their core readers.

The claims
Research commissioned by PricedOut an interest group aimed at campaigning for more affordable housing allowing more people to buy suggest that over half a million people have been priced out of the housing market since the Help to Buy scheme was launched.

The Government had to act
I do have sympathy for the increasing number of renters who have been squeezed out of the market because of price and affordability.  Initiatives such as the Help to Buy scheme along with historically low interest rates have been successful at propping up a housing market and house prices that naturally should have fallen massively after the 'credit crunch' and are clearly still over priced.  The economic fall out of a collapsing housing market would have caused an economic Tsunami of the likes we have not seen since the 1930s, hence the Governments need to act and meddle in the housing market.  Unfortunately, this has only reinforced the belief that housing is the ultimate investment in bad & good times which further delays the time that prices and affordability are more naturally aligned.

Generation rent would have faced far worse
One thing, I would say is if this action hadn't been taken I suspect that many of 'Generation Rent' who are complaining that they can't afford to buy would have been facing a very different scenario.  Houses would have been very much cheaper after a massive house price crash but with the associated economic melt down many would have not had a job and be in a position to even consider buying.  Then with this kind of massive fall in value would have resulted in many borrowers facing a lifetime of negative equity.  The illusion of ever rising house prices would have been truly shattered for ever.  How many of 'Generation Rent' would have been so keen to climb on housing ladder that clearly was no longer a one way bet?

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