Bricks, Mortar And Fickle Economics

10/08/2017 15:02 BST | Updated 10/08/2017 15:02 BST
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Ten years ago - on 9 August 2007 - news stories surfaced about toxic debt in the US sub-prime property market. The resulting 'credit crunch' soon became a full-blown financial crisis. Within just five weeks we were to see the Northern Rock Bank in deep trouble with the first run on a British bank in over 140 years.

I remember 9 August only too well, as it's the day I completed on the purchase of my first London home. I picked up the keys on Friday 10th. The mortgage scared me a bit. At least I'd not had one of those notorious 100-per-cent-plus mortgages, but the salary multiple seemed massive, and it was an interest-only mortgage to boot. The house itself, untouched for many years, didn't make the situation look any prettier. Ceilings were falling down. There wasn't a kitchen, and the bathroom was best avoided on a hot summers' day. Had I bitten off more than I could chew?

Fortunately, buying the house proved a wise move. Seven years on, I was selling up and moving on. In that half-nostalgic, half-excited mood of packing up, I came across copies of the original property deeds.

And looking into the economics behind them turned out to be as big a shock to me as that August of 2007.

Built over 80 years ago, the house is one of a development of around 300 put up by the building company Wates. Almost all the properties are three-bedroom terraced houses, usually in rows of five or six, with typical '30s features such as hung-tile bay windows, some stained glass, and those 'one over three' internal doors.

The contract between Wates and the first buyer of my old house was signed on 14 September 1933. The buyer was a crane operator who moved there from Catford, a couple of miles down the road. The price - and here's the shocking part - £620.

Ok. So we all know that £620 in the 1930s was worth a heck of lot more than £620 is today. But what is really shocking, is what that £620 represented in multiples of salary. Mr Jennings, who today would be classed as social group C1, would have been paying a mortgage of approximately two-and-a-half times his salary.

A crane operator, living in a three-bedroom inner London house near his workplace, on a mortgage that nobody these days - even in our post-financial crash prudence - could describe as reckless.

In 2017, a brand new three-bed house, with south-facing garden, in that part of London would set you back £800,000. Yet someone on an average local wage would be lucky to earn in the early-to-mid £30,000s per year. Even a 5% deposit would need £40,000 saved up. And a mortgage of two-and-a-half times income like the one the first buyer might have taken out - impossible.

No-one's pretending that the '30s was ideal in terms of British social history. There was no NHS, we still had the workhouse, and in many regions substantial proportions of the workforce were on the dole. It's just that, alongside this somewhat bleak backdrop, housing options were more promising. For those in work and on average wages, there was the genuine possibility of home ownership. In parallel to this, a massive programmes of council house building. Slum clearance programmes were underway and councils up and down the country were moving forward.

Maybe someone will do a study, looking at Land Registry documents of 1930s new-builds.

But whatever the finer nuances, it's a sad indictment that today's London housing crisis makes 1930s owner-occupation look rosy.