Tag Archives: crisis
Researcher blames government not rich foreign buyers for UK housing crisis
Decades of planning policies that constrain the supply of houses and land and turn them into something like gold or artworks is to blame for the current housing crisis in the UK rather than foreign buyers, according to a new analysis. The problem is not foreign speculators buying luxury flats as an investment in London which then lie empty but that for more than 30 years not enough homes have been built, says Paul Cheshire, Professor Emeritus of economic geography at the London School of Economics. He also believes that homes that have been built have too often been in the wrong place or of the wrong type to meet demand. For example, twice as many houses were built in Doncaster and Barnsley in the five years to 2013 than in Oxford and Cambridge. It means that in northern cities more homes have been built that in the southern part of the country where the demand and population is greater. Pace has also not kept up to demand. According to his analysis from 1969 to 1989 over 4.3 million houses were built in England but from 1994 to 2012 there were fewer than 2.7 million. In 2009, the National Housing and Planning Advice Unit, which was set up as an independent technical source of advice in the wake of the Barker Reviews of housing supply and planning, estimated that to stabilise affordability, it would be necessary to build between 237,800 and 290,500 houses a year. On a conservative estimate, that implies building 260,000 houses a year, which over 19 years would mean a total of over 4.9 million. Taking the difference between actual building between 1969 and 1989 and the advice unit’s estimate of necessary annual building, this implies that between 1994 and 2012, building fell short of what was needed by between 1.6 and 2.3 million houses. ‘This is what explains the crisis of housing affordability. We have a longstanding and endemic crisis of housing supply and it is caused primarily by policies that intentionally constrain the supply of housing land. It is not surprising to find that house prices increased by a factor of 3.36 from the start of 1998 to late 2013 in Britain as a whole and by a factor of 4.24 over the same period in London,’ said Cheshire. He explained that it is a long standing problem as discounting inflation, house prices have gone up fivefold since 1955 but the price of the land needed to put houses on has increased in real terms by 15 fold over the same period. He also explained that in the UK houses are converted from places in which to live into the most important financial asset people have and the little land you can build them on becomes not just an input into house construction but a financial asset in its own right. ‘In other words, what policy is doing is turning houses and housing land into something like… Continue reading
Home mover market in UK hits nine year high
The number of home movers in the UK increased by 9% in the first six months of 2016 compared with the same period in 2015, according to the latest research. Some 174,700 people moved up the housing ladder in the first half of the year even although rising house prices mean home movers need a higher level of deposit for their next property, the report from Lloyds Bank reveals. It means that the number of home movers has reached its highest level since 2008 when it was 179,800 over the same six month period. Since hitting a market low of 117,900 in the first half of 2009 the number of buyers moving along the housing ladder has grown by 48%. However, the report points out that the current number of home movers is still at around half the pre-crisis level of 327,600 recorded in the first half of 2007. Housing affordability for second steppers stood at 6.5 times gross annual average earnings in June 2016. On this measure, affordability has improved over the past five years from 7.3 in 2011. The research also shows that most regions of the UK have seen an improvement in Second Stepper affordability since 2011. The largest improvement was in Northern Ireland where this ratio has fallen from 6.2 in 2011 to 4.9 in 2016, followed by the North down from 7.2 to six and Scotland down from 6.6 to 5.6. In contrast, affordability has deteriorated in London from 9.7 to 10.9 and the South East from 8.7 to 9.4. Whilst a mortgage term of 25 years has been the norm for some time, many home movers are increasingly taking out mortgages where payments are spread over a longer period. In the first half of 2011 the proportion of home movers taking up a 25 to 35 year mortgage stood at an average of 9%. The research reveals that for the same period in 2016 this figure had doubled to almost one in five or 18%. Over the same period, the share of mortgages with a 20 to 25 year term dropped from 36% to 29%. Over the past five years, the average price paid by home movers has grown by 38% from £206,997 in 2011, to £261,550 in June 2016, an increase of £78,609, equivalent to a monthly increase of £1,310. In London the average home mover price has grown by 55% since June 2011 to £540,440, the largest increase in the UK. The capital is followed by the South East where home movers now pay on average, £382,324 an increase of 45% in the past five years. By contrast, the average home mover price in Northern Ireland has edged up over the same period by just 2% from £156,764 to £159,326. In the past year the average home mover price has grown by 9% or £24,056 to £285,606. The average deposit put down by a home mover has increased by 32% in the… Continue reading
Housing development land prices in UK down by 2.3% quarter on quarter
Residential development land prices in the UK fell by 2.3% between April and the end of June and activity remained steady in the run up to the historic vote on the future of the country in the European Union. The quarterly reduction extended annual declines in pricing for prime central London and greenfield development land, but urban brownfield land is still recording strong annual growth, according to the latest index from real estate firm Knight Frank. Greenfield development land prices declined by 2.3% between April and the end of June taking the annual fall to 3.8%. In prime central London, average residential development land prices fell for the third consecutive quarter, dropping by 6.9%. Average values are down 9.4% on an annual basis, but the report points out that this follows several years of very strong growth, so the index has returned to 2014 levels. Developers reported that activity continued in the run-up to the EU referendum vote, with house purchase rates remaining steady, especially in the regional markets. ‘The fundamentals of the market, characterised by an imbalance between supply and demand and ultra-low mortgage rates, remain unchanged,’ said Grainne Gilmour, head of UK residential research at Knight Frank. However, she pointed out that some house builders and developers are increasing their margins and hurdle rates on greenfield and prime central London land deals. ‘This is in order to allow for increased uncertainty over the future economic landscape as the UK negotiates its way to a new position within the Europe. This is feeding into land prices,’ she explained. In terms of greenfield sites, smaller plots for around 150 to 200 units close to urban areas and transport links are still the most in demand, with higher levels of competition for such opportunities and the report also points out that construction costs, which have risen notably over the last two years, are also a factor in land prices, especially in the central London market. Indeed, in London the cost of construction is altering the viability of some sites and in some cases this has led to a trimming of land costs. Urban land values are up by more than 9%. There is still strong demand for city centre sites in key regional locations, and in outer London boroughs, although the dynamics of each market are closely aligned with the demand and supply fundamentals at play in the local area. Continue reading
