We are, it seems, a nation in love with our houses, happy to lavish our wealth upon on them, as revealed by the figures quoted by Chris Dillow in this week’s cover feature – the first in a three-part series looking beneath the surface of this key industry. Yet this could end up being a case of the thing we love the most coming back to hurt us. There is much research suggesting that the wealth flowing into property has been diverted from more productive uses, has artificially inflated asset prices – and, for many, living costs – and thus sits at the heart of many of the economic problems so frequently complained about. Untangling this relationship has become a Gordian knot for policymakers – to shift attitudes will mean undoing almost 40 years of policy that has encouraged us into property and finding a better model to replace it, but it needs to be done, not least because it may also be contributing to our brewing pension crisis.
It is easy to understand why bricks and mortar holds such appeal, most obviously because unlike many other investments it is not only a tangible asset, but one that – for those treating it purely as an investment rather than a home – delivers income, too. That you can physically touch a house is, I believe, what attracts many to the asset class over shares or bonds, wrongly inferring a degree of stability that markets do not appear to have, making the front pages only ever after big sell-offs.
I have lost count of the number of articles I have read asking the question of whether property or shares are the better investment, most of which conclude that equities are riskier. Despite a wealth of statistical evidence to disprove it, the idea that investments in shares can disappear in a puff of bearish smoke remains prevalent. That perhaps explains why – as we heard on our live webinar on pension drawdown this week – many are not saving anywhere near enough for retirement; the average pension pot at 50 stands at just £71,000, well short of what might buy a comfortable retirement. It is no wonder that equity release is soaring, as people turn to property to fund the shortfall. But it’s a trick that can’t be pulled indefinitely.
It is probably too late to shift the thinking of the current generation on the role of property in investment, but a responsible government should now at least be educating the next one. Yet as housing minister James Brokenshire’s daft pensions-for-homes idea recently revealed, politicians appear just as hopelessly addicted to property as the rest of us.
