ONE of mankind's most fundamental incentives is securing a safe environment in which to live. True, this was not always the case, with evidence suggesting that our earliest comparable ancestors were nomadic hunter-gatherers, forever moving on to metaphorical and literal fresh pastures in those pre-Tesco days.
But the vast majority of us now live in fairly permanent residences, even if we tend to rely on outside agencies for decorative assistance rather than the cave paintings of the past.
In the UK, the housing market might be divided into three segmen
ts: owner-occupier, tenant and long-term leaseholder (the latter a sort of hybrid of the first two). There has been a steady increase in the number of home owners. In the early 1950s about 30 per cent of the country's homes were owner-occupied. This rose to 40 per cent by the Sixties, 50 per cent in 1971 and peaked at about 75 per cent in 1981. The recession in the early 1990s saw a fall in the level of home ownership but it is reasonable to assume that the majority believe that owning property remains a potent aspiration for Brits, unlike many on the continent, who are somewhat bemused by this philosophy.
Apart from the ambition of personal advancement, inflation has been a driving force in the move away from the concept of long-term tenancy.
In 1960, my father, owning a property in Edinburgh's New Town, was offered the Mews at the bottom of the garden. This consisted of the upstairs dwelling area, including a hay loft, and three garage units; the asking price was £1,000. He decided against it but, even allowing for some monetary adjustment, this property has undoubtedly seen an appreciable increase in value, which would have made it a reasonable investment.
Property ownership does have its drawbacks. For a start, it requires regular maintenance, not to mention insurance, local taxes and other servicing costs. It pays no income so there is an opportunity cost in having one's equity tied up in such an asset.
There is still, nevertheless, a view that to be a tenant is in some way to be at a disadvantage to a house owner, but is that really the case?
Our earliest ancestors, when they found a congenial cave, had to ensure it was not already occupied by a bear or similar antisocial carnivore. Today, for many, that bear is the mortgage.
Much is made of the Bank of England's control over interest rate policy in the UK. In truth, the base rate is really no more than a marker to measure to what extent we are charged above that level. It takes quite aggressive shopping around to keep a mortgage cost below 2 percentage points above base. Of course, over the past decade the average price of property here has trebled, promoting, in the process, a bloated mountain of personal debt fuelled by cheap credit on the high street.
There is now dark talk of a housing crash. However, is a fall in house prices a totally bad thing?
Even on most pessimistic of assessments prices are not expected to fall more than 25 per cent from their peak, which, for the average property, would still mean that house values have doubled over the past decade. More importantly, without taking on a total irresponsible level of debt, very few first-time buyers can afford to get into the market at all without help from parents or grandparents. Assuming, therefore, that we should still promote the concept of individual house ownership, perhaps a more imaginative approach to the sponsorship of individual home ownership is required.
This can be done by bringing back Mortgage Interest Relief at Source (Miras). Before this was withdrawn in April 2000, tax relief was eligible on your main residence's mortgage payments. In other words, you could offset the cost of servicing your household debt against your income tax charge.
It might now be the time to reintroduce the concept in limited form for genuine first-time buyers, who are the most disadvantaged. Their income is probably the least able to meet the cost of servicing a household loan and they may be regarded as a less attractive risk and therefore be charged a higher mortgage cost.
Tax relief on a total property value of, say, £200,000 would provide a boost to the "affordable" housing market, perhaps reduce rents and not cost the government an enormous amount. Similar concessions could be given to young tenants as their rental costs might be regarded as similar to those paying mortgage charges.
I am not convinced that a period of softer house prices is necessarily a bad thing, but I do believe that we should be offering encouragement to those who are looking to establish their first home. Otherwise, they are in danger of being consumed by the bear in the cave.
• Bryan Johnston is director of Bell Lawrie in Edinburgh
The full article contains 835 words and appears in The Scotsman newspaper.
