There are many, mutually reinforcing causes of the property crisis: it is too easy to borrow; there are too many people; there aren’t enough houses; what houses do exist are in the wrong place; and many houses have the wrong people living in them. Solutions exist to all of these, some of which involve building and some of which don’t.
In south-east England it is not uncommon to find people living in
£1 million homes who are skint
Today we are going to focus on the fifth problem. Too many people are living in houses which are too big for them. In south-east England it is not uncommon to find people living in £1 million homes who are otherwise skint. I know someone who lives on a long road of four-bedroom houses where they are the only household of more than two. This is daft.
The problem is psychological not structural. Intriguingly, one financial adviser tells me that there is an ironclad behavioural pattern among retirees: unless you downsize before the age of 72, you will never do it unless driven by highly adverse financial or medical circumstances. It isn’t clear why this is – perhaps, once you reach 72 or so, you are reluctant to risk the inconvenience and cost of moving, only to have to repeat the procedure four years later. If this is true, it would be comparatively easy to nudge people into early downsizing by offering a limited-window, stamp-duty holiday to downsizers aged, say, 60 to 72.
But there is another psychological approach which could increase liquidity in the property market. You simply redefine what it means for a house to be ‘on the market’.
Writing in the Telegraph, Tristan Rutherford explained how, on returning to the UK, he was unable to find a suitable house in Lichfield. So, following the example of Alan Sugar, he wrote to the owners of 25 suitable homes that were not for sale. Five wrote back, expressing an interest. Three included an invitation for a tour. He duly found his home.
This finding fascinates me. None of these 25 homes was ‘on the market’. But five people were willing to sell when given an offer. Logically, this makes no sense. But I suspect it isn’t logical – it’s psychological.
I’ve therefore been carrying out an experiment. Whenever speaking to an audience of 200 people or so, I ask the audience to raise their hands if their house is on the market. I then ask if anyone would consider selling if presented with a reasonable offer. Every time I have tried this, more than four times as many people respond to the second question as the first. I even got the same result in Canada.
What is going on here? Why are people more reluctant to ‘put their house on the market’ than they are to sell? Is it that people hate estate agents even more than they hate moving house? Plausible, but I don’t think that’s it. I suspect that once you see your house as being for sale, you enter a state of limbo where you no longer derive any pleasure from your ownership of your home.
If someone offers to buy your house, however, you bypass any uncertainty or fear of rejection. It’s a bit like dating: you wouldn’t go on Tinder if you’re happily married, but if Jessica Chastain/George Clooney invited you out for a drink, you might rethink your living arrangements a bit.
The solution to this is surprisingly easy. Government simply mandates that all homes are for sale all the time. There is no obligation to sell – you could simply quote a ridiculously high price. A website called chimnie.co.uk gives a glimpse of what this might look like. It would be a disaster if we applied the same principle to dating – it would lead to massive promiscuity and family breakdown. But in all other markets, we call promiscuity ‘liquidity’, and it’s exactly what families need.
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