‘An Englishman’s home is his castle’ – so the saying goes, and so the evidence suggests. But there are signs the ongoing British obsession with home-ownership could stoke an artificial housing boom, which would be unsupported by the wider economy.

Last year, 68.3% of homes in Britain were owner-occupied while just 13.9% were privately rented. That might not sound startling, but these figures actually signify the highest proportion of privately rented households in the UK since the 1970s.

Ever so slowly, lettings are beginning to rise and sales beginning to fall. Throw in an enormous recession, from which the property and mortgage loan market is hardly immune, and you may have the ingredients for profound change to an aspect of British culture that is centuries old.

So what do the property dealers make of the situation? I spoke to several, and each one confirmed the lettings side of their business had improved in recent months, while house sales continued to decline or stagnate. At least one suggests that lettings have as much as doubled since January 2008. Andrew Berry, Managing Director of Haart Lettings, says “Haart Lettings has seen a dramatic increase in the rental market during the recession. If people aren’t sure what is going to happen to their jobs, they are not going to tie themselves into a mortgage and are far more likely to rent.” Carl Mimmick, Managing Director of Birmingham-based lettings agent Accord, adds, “Our lettings have grown and the average time a tenant stays in a rented property has increased by about 20%.”

It’s not just the number of tenants that has risen, either. Many home-owners suddenly found themselves living as ad hoc landlords, as Murray Kerr, of Bonnets estate agents in Brighton, explains: “the problem Brighton had, like many cities, is that they built a lot of new developments when the going was good. Customers bought these properties at the wrong time and now people who can’t afford to sell have been forced to rent in order to move on – they didn’t intend to be landlords. Our business here grew as a result because people came to us looking for agents.”

But all the agents and tenants agree that renting is likely a short-term solution to what everyone hopes will be a short-term problem. The implication is that we’re all still itching to get back on that ladder. Another lettings agent explains that many of his clients are just “renting for six months until they can afford to buy a house.” The rise in house prices over the last six months is proof that for eager prospective buyers, whose ideals have been conditioned by a decade of sunny Channel 4 property trading programmes, the home-owning culture of the boom lingers in spite of a flat-lining economy.

Take Carl Zandberg, a London plasterer with his own business, who, having bought his house shortly before the recession hit, is still relieved to have finally left the private rented sector: “I was anxious to get my own home because I really didn’t like paying out that money every month to somebody else. I wanted to have my own place because I can do what I like with it, I’m constantly doing up other people’s homes and now I can improve my own.” Zandberg exhibits a common British cultural attitude: prospective homebuyers view paying rent as ‘giving money to someone else’. By ‘someone else’, they generally mean their landlord, who they see as the ‘real owner’ of the property. However, when paying mortgage and interest payments to a banking company, having borrowed money to purchase the property, they choose to view themselves as a ‘landlord’, as opposed to their banker. This illusion is central to the contemporary British homebuying culture.

Kate Fox, in her book Watching the English (2004), suggests that home improvements are also a quintessential British desire, contributing to an obsession with calling our home our own: “an Englishman’s home is much more than his castle, the embodiment of his privacy rules, it is also his identity, his main status-indicator and his prime obsession…This is why a house is not just something that you passively ‘have’, it is something that you ‘do’, something that you ‘work on’.”

This status-anxiety is echoed by Carl, who notes “…There’s lots of pressure to go out there and buy a property. Everyone is keeping up with the Jones’s. It’s not always an investment thing, it’s because you want something that someone else has.”

Carl’s views are shared by many in Britain, where personal aspiration frequently fuses with a home ownership culture, and estate agents, mortgage brokers and banks are the chief beneficiaries. But the huge number of foreclosures in the UK – the state owned bank Bradford and Bingley reported a 50% rise in the number of home repossessions in the first half of 2009 – shows that this ‘mad dogs and Englishman’ approach to playing the property game can have dark consequences.

And what happens if, as many forecasters predict, Britain experiences a decade of low growth or even deflation? Estate agents, of course, rarely pass up an opportunity to talk up the market, but it’s their clients, the prospective buyers, who will pay the greatest penalty for failing to properly analyse future market conditions. If they fail to read the economic signs, it’s entirely possible that an ownership fixation, akin to the irrational euphoria that fuelled an unsustainable finance and housing boom over the past decade, will kindle a dramatic rise in house prices in the short-term, with another crash potentially on the way.

Professor Steve Wilcox, editor of the UK Housing Review and a member of the Centre for Housing Policy, says this is certainly possible in localised markets, warning the trend could cause the British economy to plunge again.

“I’d be looking at what’s happening in the wider economy rather than just the housing market. Lagging unemployment is an indicator. Whatever happens in the election next year, we’re going to see significant pressures on public spending. The spatial impact of the recession will change… it’ll move from the financial sector to areas where there’s a high proportion of public spending. The overall level of economic recovery is a matter of how sharply we see a fall in public spending and public sector employment. That could potentially cause a double-dip situation.”

Ed Stansfield, head of housing market research at analysts Property Economics says, “I’ve got a lot of sympathy with those who think the recovery we’re seeing now is not sustainable. The market is very thin right now and what we’re getting is a picture based on a select group of buyers acting under abnormally low interest rates, so it’s not necessarily representative. On ‘normal’ interest rates, property would actually still be considered very expensive.”

Another indicator of the continuing property fetish is the rise of innovative new co-ownership products. Strikingly British in their eccentricity, versions of these schemes have been around for decades but in the last five years they have experienced their own mini-boom. Typically, a group of friends will club together to buy a house, then pool money for the deposit and commit to paying off the mortgage over the next decade or two. In recent years new variations on this theme have been developed: one increasingly popular plan sees buyers enter into an agreement with the government or a private agent to rent them part of the property. In some cases, buyers start off by ‘owning’ as little as a quarter of the property, before later purchasing further portions – a practise that is vividly referred to as ‘staircasing’. While such schemes promise great material for a This Life follow-up, they lack practicality and foresight. Apart from the economic risks involved, they seem a sure-fire way to ruin a friendship – and if the Englishman of folklore has to share his ‘castle’ with his friends just so he can afford it, surely the nature of a purportedly ‘private’ property investment begins to look ridiculous?

Websites like www.co-buyers.net even help complete strangers contact each other in search of prospective home-mates. An anonymous user of the site told me, “my husband and I are finding it increasingly difficult to raise the 20% deposit (approx. £30,000) for an average priced £150,000 property in the area we live. Like most people we would prefer to own than rent as we feel the money is going towards something more worthwhile… I guess there is some apprehension about this type of buying if you don’t know the co-buyer but as our options are limited I still feel it would be a good idea”.

An astonishingly small number of the people I interviewed were aware of the cumbersome reality of property trading. Houses are what economists describe as ‘illiquid assets’, which is to say they are not easy to sell, particularly in a down market, and the danger for buyers is that they often have little awareness of the disadvantages associated with investing in a home. Apart from the difficulties of selling a property quickly, there are other problems: asset depreciation and the money that must be periodically spent to fix roofing and structural problems, and so on; the lifestyle pressures that come with paying off a substantial mortgage loan with interest payments, over what is likely to be a twenty year plus period; and the reality that the value of the housing market, like any other, can go down as well as up. Many boom-time buyers, who were not fully aware of the risks they were taking, have fallen into the unenviable position of being in ‘negative equity,’ which is when the value of a buyer’s home sinks below that of their mortgage debt. The personal consequences in the long-term could be severe.

The Centre for Housing Policy is a think-tank frequently employed by the government to advise on the economic implications of housing policy. Senior Research Fellow, Dr. Julie Rugg, says that the new co-buying schemes are still teething, and that the mythic hold of the home ownership concept over the British psyche is still strong, thanks, in part, to continued government encouragement. “Lots of policy rhetoric about [renting and home buying] is very ambiguous, such as the HomeBuy schemes. On some levels [the government is] still giving the impression that if you rent you’ve failed somehow”. In a speech to the Fabian Society in 2008, the then housing minister Caroline Flint said the government aimed to help people “into work and onto the property ladder.” She added, “Many social tenants have a real appetite for change and self-improvement. Most say they’d like to own their own home. And if we don’t work together to unlock their potential, then we are failing to live up to our responsibilities.”

Dr. Rugg recently found, among other things, that local authorities could be doing much more to “support good landlords whilst tackling poorly performing landlords and promoting tenants’ rights.” She also feels that current taxation hinders landlords’ growth and that overall there isn’t enough protection for vulnerable tenants. Another member of the Centre for Housing Policy, Professor Mark Stevens, also notes “there are political reasons for shying away from social renting because unemployment among social tenants tends to be much higher.”

So what’s the worst-case scenario if these trends continue? The ‘double dip’ threat mentioned by Steve Wilcox is something a number of analysts and industry insiders are considering right now. Lucian Cook, Director of Savills’ Residential Research group has said that the agent expects house prices to fall by 6.6% next year, bringing the average cost of a UK home back down to £150,000. “What we think will happen,” he said, “is that premature house price growth will be followed by a down period and what could actually occur next year is a slow haul out of recession. That said, we don’t think prices will go below the February ’09 level and affordability for those who can buy is still strong at the moment.

“There will be greater sobriety when it comes to mortgage sales in the future, I think. One of the lasting results of the credit crunch is that ‘renting’ will no longer be a dirty word.” Ed Stansfield agrees: “I think from now own we’re going to see a lot more scepticism on the bottom rung of the property ladder.”

Nevertheless, home-ownership ideals seem to still be firmly entrenched in the British psyche, and prices are still rising. Unless prospective buyers and potential tenants are better informed of the risks that they are taking, it’s possible that a combination of cultural, political and financial factors could drag Britain through the mud again. The chances of a major cultural shift in the immediate term seems slim, however, but there is an alternative perspective: that the collapse of a mini-housing boom could prove beneficial for the British economy in the long run.

If would be homebuyers are increasingly persuaded to rent by adverse market conditions, savings and bank holdings will rise, and the personal debt culture that has taken hold in the U.K. in recent years, and which threatens to strangle any economic recovery, could abate. While the proverbial Englishman’s castle would become a mere rented turret, order and sanity might once again reign in the Kingdom.

Photography by woodleywonderworks