There is perhaps an assumption amongst my generation that buying a piece of freehold, be it land or property, is a good investment. We were encouraged to buy our own home as soon as we could. Mortgages were easily available and it was part of the natural order of things to save a deposit and buy.
But were we right to make that assumption? A significant number of people are now finding themselves struggling to pay a mortgage, if they are still able to pay at all. The plunging value of houses and a stagnant market has left many, who might have sold otherwise, in negative equity situations where they are tied to their property whether they like it or not.
Certainly, buying into bricks and mortar has not yielded the kinds of returns we were promised. Even some older people are finding themselves in dept. They have mortgages still to pay in their retirement after taking out additional home improvement loans and adding to their borrowing over the years.
Are some homes still a block of bullion?
However, for some people, buying property is still a very lucrative way of stashing cash whilst also virtually guaranteeing a good return when they do decide to sell. A revealing and perhaps disturbing report from the Guardian makes interesting reading. Robert Booth reports that a third of the extremely expensive (on the market for up to 65 million) properties on Bishops Avenue in London are unused and in disrepair. Some of these are owned by members of the Saudi Royal Family.
Even those that are occasionally used are vacant for the vast majority of the year, and this at a time when there is a housing shortage in London. The Guardian reports that most of the properties are registered to companies in tax havens which then allow the owners to remain anonymous and avoid paying stamp duty. The people who own these properties do not contribute to the local economy and create what one person describes as an ‘expensive wasteland’.
The waste has not gone unnoticed. Boris Johnson has entered the debate, suggesting that ‘London homes…. aren’t just blocks of bullion in the sky. Proposals have included that anyone who neither lives in a property or rents it out for more than two years should have their council tax rates multiplied.
Another suggestion is a form of non-resident tax to target those very wealthy people who are buying up chunks of London. The counter argument given by some is that this will then force them to buy elsewhere. Considering the level of wealth and income of these people surely this tax would be but a drop in the ocean and would perhaps compensate just a little for the detrimental effect that luxury homes in storage might be considered to have?
For the rest of us, even in the current climate, purchasing your own home to live in and enjoy is still the ambition for most. Buying a holiday home to enjoy yourself is an investment that you and your family can benefit from over the years. However, if you’re looking to make a sizeable profit from buying and selling or even renting out your property, then perhaps you should consider the other options for investing your money first.
Inside ‘Billionaires Row’: London’s rotting, derelict mansions worth £350 m: The Guardian, Friday 31st January 2014: