Penetrating analysis in this newspaper by Kathryn Holmquist of a pricedriven property market locking out young first-time buyers, which found confirming echoes from many sources, including in the annual report of the EBS building society, built up a fair head of steam between the ears of Therese Langan, my amiable next door neighbour. Blessed with a charmingly volatile nature, Therese was in unusually combative mood, buttonholing me with her thesis on the socioeconomic consequences of a property market out of control. Her argument goes that the combination of a mortgage and child-care costs is now more than ever the more effective contraceptive for the average couple.
For the fortunate few who become owner-occupiers, financing the massive debt burden on the average £100,000 property is compounded by the soaring costs of child care. Two incomes are no longer a luxury but an imperative, the prospect of children an unacceptable cost factor in this equation.
Therese envisages that these severe economic pressures will lead both to rising inflation and a declining birth rate, with far-reaching repercussions for the economy in 20 years' time. Meaningful tax reliefs on both mortgages and child-care costs would, she says, would ease financial pressures on demoralised young couples and help safeguard economic stability. It's an argument difficult to refute.
The EBS building society, which is turning away many applications from first-time buyers with well-paid jobs, says as much this week in warning that the current property boom and increased debt levels could lead to unwelcome inflationary pressures. The market, it says, "has entered a phase in which demand and price increases may not be supported by long-term fundamentals". It recommends a review of tax breaks on residential investment property, beefed-up assistance for first-time buyers and other tax reliefs but shies away from price controls.
Our mutual friends had a good year, with strong growth in lending and deposits. The society is doing its bit in difficult circumstances to help provide homes for those who meet its admittedly tight criteria. Total advances soared 61 per cent to £626 million and new funds jumped over 100 per cent to £567 million.
While the EBS is among the beneficiaries of the property boom, the tenor of its analysis on the current feeding frenzy makes disturbing reading. High demand and buoyant lending conceal fundamental difficulties. A housing market with annual price inflation of 25 per cent benefits no one, least of all young couples. For Therese and her young family, the major financial battles already fought and won, growing a little older in the modest security of semi-detached land is not without its blessings.
