Euro pressure on equity means UK homeowners face their Waterloo
Now the general election is over and our government's batteries are recharged we can open a new can of worms: 'will joining the euro affect our property values?'
Until now attention has been focused on the personalities, politics and economics of the single currency, matters which have been pursued down to the cost of rebuilding the nation's coin-operated vending machines. Larger issues - like what will happen when an owner-occupier housing economy is thrown in among a mass of tenancy housing economies - seem to have been deliberately put to one side. Yet the encounter has the potential to bring about the biggest change in the British pattern of tenure for 90 years.
The salient fact is that owneroccupation, as we know it in England, is an anomaly in continental Europe. It has no roots in either the Napoleonic or Wilhelmine tenure systems of the 19th century, or even in the feudal system in England. British homeownership originated in the widespread social distress caused by the raising of a huge army to fight the war of 19141918, distress that was remedied by the imposition of rent controls upon 90 per cent of the homes in Britain.
Wartime inflation being what it was, by the end of the Great War the gap between free market rents and the controlled rents that tenants were paying had become unbridgeable.As a result, rent controls continued and estates of tenanted properties turned from assets into liabilities. Developers responded by building houses for sale instead, while unprofitable controlled properties were sold off at discounts to occupants or with sitting tenants. Come the 1939-1945 war and rent controls were imposed again with the same result.
Controls did not begin to be removed until the 1960s, nearly 50 years after they were first imposed.
It was during this massive intervention in the housing market that owner-occupation became the dominant tenure, enjoyed households whose virtually untaxed properties steadily increased in value through mounting demand, outstripping their mortgage debt and generating equity capital.
By the late 1980s this capital was estimated to be worth more than £700 billion; by 2000 more than £1.2 trillion.
It is this colossal untapped equity - with no equivalent in continental Europe - that lies at the sharp end of the coming euro encounter as far as homeowners are concerned.
The British see homeowners' equity as wealth, an insurance against poverty that can be tapped from time to time. The continental Europeans see it as plunder, undeserved private booty that explains the appalling state of our health service, public transport, education system and everything else they pay for in property taxes but we don't.
Those who deplore the harmonisation of taxation and finance that is certain to come about as the European Union moves inexorably towards federalism foresee a capital levy of some sort being imposed on Britain's homeowners to relieve them of the 'burden' of their livein wealth. Pro-Europeans see the opposite. They expect a reward;
immediate access to all their equity, in the same generous spirit as obtained during German reunification, when the near worthless East German Ostmark was granted parity with the Deutschmark and East Germans became suddenly, if briefly, rich.
If such a tax robbery or a monster windfall does occur, having in effect sold and leased back their dwellings to the state, the British former capitalists will find house prices stabilised at last - but at prices so inflated and heavily taxed that only European-style landlords can afford to buy them.
At this point Britain will truly be said to have joined the European Union.