Too many property millionaires is a sign homes cost too much

Morning View
Morning View

A growing number of towns in Britain now have average property prices in excess of £1m.

According to Lloyds Bank, there are now a number of locations outside London with such a high typical home price.

The few such towns are mostly near the capital.

It will be many years indeed before any town in Northern Ireland has a seven-figure average price, although there are already streets such as Malone Park in Belfast that probably do, as well as one or two areas such as Cultra in north Down.

Reports of £1m homes are popular, and understandably so: it is not unreasonable to dream of owning a grand home.

Nor is it unreasonable for homeowners who have long lived in a house to hope that it has risen so dramatically in value that they are now millionaires.

This desire has a particular resonance in Northern Ireland when many people found to their surprise in 2007 that their home was worth a lot of money, only then to watch its value plummeting. There must be many owners, even people whose home was ‘only’ worth £400,000, who wish that they had sold up and funded an early retirement to Spain or a round the world cruise, or whatever. It would be normal for such people to hope for a return to those days.

But the last boom on both sides of the Irish border dramatically illustrated the downside of a housing bubble.

It became akin to a ponzi scheme in which people at the bottom (ie first time buyers) pay more and more and those at the top (ie older people who own their home outright) become rich. Ultimately few people gain, because children end up needing significant parental support to get on the ladder.

The last house price boom in many countries (including America) almost brought down the entire financial system.

It has been good to see a return to activity in the NI housing market and to see relief for those worst hit by negative equity.

But if people are becoming millionaires in their homes, it is often a sign of something unhealthy in the housing market.