Of all the signs that the Conservatives could be heading for a real catastrophe at the next election, the latest reports about projected falls in house prices must surely be amongst the most worrisome (for CCHQ, at least).
Until now, the figures being bandied about for an anticipated slump were only looking at taking prices back to where they were in about 2020 or so. But according to the Daily Telegraph, the forecasts now suggest that we could see prices go back to where they were in 2013 – a 29 per cent real-terms cut.
This is not just because comfortably-off people without mortgages – such as the ICC vampire – will get pissed off at the face value of their cherished asset going down (although they will). Higher borrowing costs will directly fuel the cost-of-living crisis. The Guardian reports that an estimated 300,000 people come off their current fixed-rate mortgages every three months. That means that each month, about 100,000 people are having to renegotiate and lock in much higher monthly outgoings.
In such circumstances, the best case scenario is that a lot of households are going to be materially poorer as a much larger slice of their monthly earnings go to servicing their mortgage. The worst case – and the one implied by a predictions of a housing crash – is that we end up with lots of distressed sellers losing their homes.
This would be especially toxic because the homeowners most exposed are those who are still servicing most of the principal and who had to leverage themselves the most to get on the ladder, i.e. people who bought since about 2013, under the Conservatives.
It’s interesting that the analyst quoted by the Telegraph name-drops the introduction in that year of Help to Buy, one of the succession of Tory efforts to fix the housing crisis by pumping more demand into the market, as a landmark in the evolution of the market. How will people who took advantage of such programmes, or others such as Rishi Sunak’s Stamp Duty holiday, feel if they then lose their homes in what will be widely (if not necessarily fairly) perceived as a Tory-induced crash?
There are, of course, people who might be less dismayed at the prospect of a serious fall in house prices, most obviously prospective first-time buyers. But a crash caused by a spiralling cost-of-credit doesn’t even offer such a silver lining, because they would face the same ruinous borrowing costs as existing mortgage holders.
And that’s if the banks are prepared to lend at all – even before the mini-Budget, they were apparently gearing up to slash mortgage lending.
If that happened, the people best able to capitalise on a big fall in real-terms prices would be foreign investors and institutional investors, plus wealthy landlords with some ready cash looking to expand their portfolio as an exodus of homeowners puts even more upward pressure on rents, screwing non-homeowners too.
The Conservatives have been putting the short-term interests of current homeowners over the interests of the next generation and the nation for a long time, and destroying the long-term foundations of their future coalition in the process. There was always going to be an electoral reckoning for that at some point. It might be as soon as 2024.