Tuesday, 17 March 2009

A sad tale

A neighbour is moving out tomorrow in very sad circumstances. She came to this area just over a year ago and bought her flat at the peak of the market. She knew it was the peak of the market but was expecting a baby and wanted a place of her own for her child to grow up in. On viewing a nearby flat she fell in love with it immediately, it was just the size, location and layout she wanted. As a professional person employed on a good salary by a good firm all was set fair. Let the property market fall, it wouldn't matter because she bought at a price she could afford and she bought a home not an investment.

Over the year after she moved in builders scurried hither and yon providing a new bathroom and kitchen, a re-wire, re-plastering ancient walls and all the other things necessary to turn a very nice flat into a very nice modern flat. And then the bombshell hit. Redundancy. All of a sudden the affordable became hopelessly unaffordable. Selling was not an option without something in the region of £50,000 in the bank to cover the difference between the likely sale price and the cost of redeeming the mortgage. So she is letting the property for the best rent she can get and moving in with a family member until such time, if ever, that her dream home can be reality again.

Of course there are thousands up and down the country facing a similar predicament and my neighbour at least has a little wriggle room in that she is a highly qualified lady for whom there is a realistic hope of a return to well paid employment in the not too distant future. In the short-term, however, she knows that as the mother of a small child there will be few positions she could take without making sacrifices over the care of her child that she is simply not prepared to make. This week has seen the removal van arrive and tomorrow she moves out, perhaps never to live here again.

Talking to her last week I was surprised at how sanguine she was about the whole thing. There was a shrug of the shoulders, a sigh and "oh well, it could be worse, I could have borrowed a lot more and then I'd really be stuck". As she explained, letting the flat gives her a chance of being able to keep it in the long term, a chance she would not have had if she had borrowed a lot more because the shortfall between loan repayments and rent would have been unsustainable. She has a chance to recover, unlike so many who have lost their jobs or will do so as the slump works its way through.

It's such a shame because she has been an excellent neighbour. It is all the more of a shame because her dream, a dream that was entirely realistic when she moved in, has been shattered. I wish her well.

1 comment:

Mark Wadsworth said...

Very sad. But this is how people like you and me make our money.

Part of the point of Land Value Tax is to keep property prices low and stable so that people don't get caught in negative equity like this. In economic terms, you own the bricks and mortar and pay rent/tax on the location element.