Thursday, 5 June 2014

The big question: university or housing?


Property expert Kirstie Allsopp's recent controversial outburst about young people's life choices is as unsurprising as it is depressing. Put briefly, she said that young women might be better off leaving school, getting a job, saving up a deposit, buying a flat and meeting a man with whom they want to have a child. Welcome to Amazing Surreyworld, everyone. Or, in Allsopp's case, perhaps amazing Kensingstonworld would be more like it.

Let's leave aside the sexism involved (did she say this about men? Er, no - though she wasn't asked about them, to be fair). Let's set to one side the false claims (that fertility 'falls off a cliff' when you're over 35, which is a huge exaggeration). Let's not get embroiled into the actual reasons why we go to university in the first place - not because we want to earn more (though graduates usually will), but because it can be a mind-expanding, consciousness-forming, helter-skelter ride and an intellectual game-changer.

No. Let's look at the economics.You knew that we were going to say that, didn't you?

What Allsopp's advice in fact reflects is the irrationality of our economy. If we think in purely monetary and quantitative terms, the pressure is indeed all on buying property as fast as you can - seizing the Monopoly board, not investing in your skills or your intellect and career. For, like it or not, and in the South East of England at least, your lifetime income is just as likely to be determined by how much property you can afford to grab hold of as it is by how much you can earn. Sad, but true. Britain's runaway housing boom means that prices in London have doubled since the years immediately preceding the crash. And it's here that Allsopp has a point - like it or not. It means that, yes, economically at least, men and women in their late teens should recently have bought a flat as quickly as possible. Oh, it could you 'only' £200,000 in 2006 or 2007? That'll be £400,000 these days, mate. Now that's £200,000 in your pocket, straight away, so you can move out of London and pretty much set up home where you like - as more and more Londoners with young families (or those seeking a second home) actually are. Instead of £40,000 or so in student debt. Each. It's an incontrovertible balance sheet gain of £280,000 or more - fun for those with money to play, as long as the boom lasts.

The most recent, and chilling, news for those self-same young people is that their student debt is indeed, under the Mortgage Market Review now straining to hold back the breaking dam, to be counted on the debit side of their personal balances by mortgage lenders. That means it's going to get even harder for young people to 'get on the housing ladder', as no doubt Allsopp would have it - or 'live somewhere decent', as those who speak in actual English might say. All the more reason for them to stampede estate agents now, just like they did in the late 1980s when they heard about the end of Mortgage Income Tax Relief for couples. That turned out well, didn't it?

It's all built on sand, of course. The London bubble can't last, and it's already showing signs of slowing. It'll end in tears, just as it did in the mid-1960s, the mid-1970s, the late 1980s and the crisis of 2007-2008. But for now, there's plenty of steam in the speculative pump-up-the-volume boosterism that passes for economic comment in any era dominated by property speculation. You could call it life-affirming advice to youngsters, if you really prefer.

But we know in our hearts the reality that really lurks behind these words: the same grotesque parody of an 'economy' that Allsopp (above) herself both reflects, and has helped to construct. Thanks, Kirstie.

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