The collapse of Northern Rock is seen as the point at which the bubble burst in the UK, but it was a month earlier, in August 2007, when financial markets began to panic as the extent of the sub-prime crisis became clearer.
Few people would have predicted back then that we’d be little closer to a recovery by summer 2012.
Clearly we’re not, and at the risk of seeming excessively bearish, it’s now easier to envisage five to ten more years of crisis than any return to what might, before August 2007, have been considered normality.
Take the housing market, for example. Two months ago a surge of first-time buyer activity ahead of the end of the stamp duty holiday prompted predictions of a gentle but sustained upturn.
Today that notion seems almost naive. There was a marked fall in the number of mortgages advanced last month, the Council of Mortgage Lenders revealed on Thursday, underlining the extent to which the improvement earlier this year was fuelled by the stamp duty concession.
House prices have slipped again and will fall further. Only a shortage of supply is preventing a steeper drop in property values, but with lenders tightening their criteria once more and consumer confidence seeping to new lows amid Eurozone uncertainty, worse is to come.
One area of the market is virtually thriving, however – and it is the sector perhaps most closely associated with the pre-crunch boom years.
Buy-to-let is not exactly booming yet, but it’s got a lot more life in it than other areas of the housing market.
Investors realise demand for rented accommodation will only rise over the coming years; we’re sufficiently distant from a housing market resurgence to know that many would-be first-time buyers will be unable to reach the first rung of the property ladder over the next decade or so.
But with rents rising and property still offering the prospect of long-term capital growth, buy-to-let is a logical outlet for those with cash stored up and lacking confidence in other asset classes.
Buy-to-let lending in the first three months of this year was a third higher than in the same period in 2011, and while it remains a long way off pre-2007 levels, it’s going in the opposite direction to the rest of the housing market.
Which is why we need to be vigilant. Rents are rising and, with incomes squeezed, are beyond reach of a growing number of tenants.
Soaring rents mean we’re on the way to having a three-tier rental market, according to a new report by the Joseph Rowntree Foundation, comprising those that can afford to privately rent, a squeezed middle struggling to pay and a lower rung where people are frozen out entirely.
Homelessness is climbing too, while, significantly as far as recovery prospects go, would-be buyers are unable to put aside the savings they need for a deposit.
Five years after the credit crunch began, buy-to-let investors are once again keeping first-time buyers off the property ladder. First-timers with relatively small deposits will always lose out to investors with equity in their existing homes, and properties that would previously have been snapped up by first-timers are increasingly being taken by buy-to-let investors.
The credit crunch offered plenty of lessons, but they haven’t all been absorbed. We might not be heading for a buy-to-let bubble, but the sector’s resurgence holds real dangers and will prove yet another obstacle to a similar rebound in the wider housing market.
More evidence of the disastrous side-effects of quantitative easing (QE) this week, with final salary pension fund deficits hitting a new high.
The latest increase is due to a plunging gilt yields, driven down by QE and by demand from international investors turning to UK gilts as a safe haven.
Many of the few firms with final salary pension schemes still open to new members will inevitably look again at closing them. For those with final salary schemes still open to existing members, efforts will be redoubled in transferring the risk to those members by shifting them into defined contribution pension schemes.
This often involves incentive packages stacked heavily in the favour of the employer, although a voluntary ban is finally being imposed on cash bribes. But as QE pushes final salary pensions deeper into the red, companies will find persuasive new ways to lure workers into sacrificing benefits that they’d be well advised to hang on to.