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Britain will never build enough houses to make property affordable for young people, according to research.
A study presented to the Royal Economic Society’s annual conference said those hoping to get on the ladder may have to rely on windows of opportunity created by periodic slumps in the market.
However, the overall trend will remain for residential property price rises to outpace salary growth, according to economists at the University of Reading.“The increases in housing supply required to improve affordability have to be very large and long-lasting; the step change would need to be much larger than has ever been experienced before on a permanent basis,” said Geoffrey Meen, Alexander Mihailov and Yehui Wang.Former Bank of England policymaker Kate Barker believes the country needs an additional 60,000 homes per year on top of those already being built.
But the new paper argues there is little chance of this happening.
“Although higher levels of house building are certainly desirable, the paper shows that there is a limit to what can be achieved by this route,” the report found.
“The required increase in supply to stabilise the price to income ratio ... is not feasible - permanent increases in construction would be required that have never been achieved in history.”Full/source article SEE ALSO - Housing crisis? You ain't seen nothing yet! A "perfect storm" is brewing.UP NEXT - Six babies have been born for every new home built in England since 2010 DON'T MISS - Where next for house prices?NOW WATCH:
Due to the inability of the Govt to force the feckless 2 million unemployed to do all the work the migrants do there will be a continuing housing crisis.
Migration will continue at the same pace even when we leave the EU
There is plenty of low paid work, just that the feckless unemployed don't want to do it
Choice shouldn't even enter the equation
The feckless should be forced to do any job available or face total removal of their benefits.
Unless all migration was stopped it would take about 20 years to build enough accommodation
There is simply too much demand for our current building logistics to cope with.
Which is why there will always be a need for the PRS.
Something stupid Govt hasn't quite worked out.
It naively believes that institutions will provide the bulk of the required rental accommodation
Not chance in hell of that ever being the case.
"The required increase in supply to stabilise the price to income ratio" - When interest increase then property prices are likely to fall as it will impact on affordability and therefore the price to income ratio will reduce - unless we see wages increase at the same time.
"windows of opportunity created by periodic slumps in the market" - that has always been the case in the South East, there are times we can afford to move and times we cannot afford the next property.
"Britain will never build enough houses to make property affordable for young people" - It may not build enough houses but the increase in the number of flats that are being built is staggering, it may be that there will need to be a change in the expectation of the type of property people can live in. I also wonder what the impact will be of Britain leaving the EU, I tend to think that we will see a reduction in net migration and this will free up residential property.
is a very long time
We have never had enough housing for 100 years. A lot of maths involves approximating 0 & infinity, so I think mathematically it's OK so say never.
Its simply false to say or suggest there is a housing problem everywhere in the UK.
How can that be true when in most the country, two people working full time and earning min wage can buy the median two bed terrace house quite easily.
For instance the median 2 bedroom terrace in Birmingham costs £130,000 which is affordable for people on minimum wage
Its true for about 70% of the country
Aya stop talking sense!
You know all housing policy is viewed through the prism of London and the SE
The rest of the country doesn't exist
If it did mention would be made of the current 650000 empty homes.
Trouble is these empty homes aren't in the SE so we still have an alleged housing crisis!
There really is no shortage of housing in about 90% of the country. Houses are not only affordable but are so cheap in about 70% of the country that couples on the minimium wage can afford to buy
The government and some commentators, even on landlord forums like this confuse two things
They confuse more renting with a housing problem, it isnt, we have more renters primarily because we have more people who want or need to rent especially the 4-5 million new migrants over the last decade who have to or want to rent. In time they will buy but they can not buy straight away some may never actually buy for example if they came here when they were 40 and it took them 10 years to save and establish a good stable job then they are 50 and the mortgage rules make it quite difficult at that point to buy.
They also confuse higher prices with a problem, well that is wrong for two reasons. Firstly just because something goes up in price it does not then mean it is unaffordable. Clearly Birmingham is still cheap not just affordable but cheap. The fact that it was cheaper 20 years ago does not mean it isnt cheap today. Another reason why higher prices are wrongly concluded as a problem is that most people have no concept of real prices vs nominal prices.
So landlords please stop spreading the nonsense that we have a housing problem or shortage because we dont at least not in the vast majority of the country. Arguably we could use more homes in inner London and there is a lot of building going on there and maybe also some hot spots like Cambridge but everywhere else is mostly fine.
If this myth continues then what will happen is that government will pull leavers to try and build more homes, but the builders are not stupid they can not build what they can not sell. So that has failed for a decade and will continue to fail. We are not china or Turkey where there are true shortages of housing and corresponding MASSIVE amounts of new building going on. We have over 28 million homes in this country for 65 million people thats 2.3 persons per house its not like we are crammed. So if the shortage of homes myth continues and the builders simply cant build more homes as there is no shortage then the government will look to punish landlords with things like S24 and the 3% stamp duty.
Londonland sets the Policys for the rest of the UK
How short sighed is the Govt Policy on UK Housing
I was hoping for great things from UKIP but they are a shambles one way or another
Learn Change and Adapt ?????
It is questionable whether there will ever again be a slump in house prices, on the scale of the mid-1970s or mid-1990s. Slumps are generally caused by a combination of recession/job losses and high interest rates, creating forced sellers and a vicious circle. With so few owner-occupiers having a mortgage or a mortgage on a high LTV nowadays (more than 50% of all properties are now mortgage-free), and with so many more private landlords (who are investing for the long-term and their tenants, provided they are in work, are the ones covering the mortgage interest), it's arguable that if a recession did hit, most people would be able to ride it out. It's been striking how little house prices fell after 2007-8, for example, and how every time there was a sign of falling prices, people took their properties off the market, supply tightened, and prices stabilised. Those people were clearly in a position to choose whether to sell; they weren't forced sellers. Obviously the ultra-low interest rates helped a great deal here.
I suppose we could have a slump if we get a combination of a global recession, a rapid rise in interest rates (probably to try and control inflation, but hurting hard anyone who's taken out a mortgage since 2008 and become used to ultra-low interest rates), and a collapse in immigration, so a PRS over-supplied with property meant over-geared landlords suddenly couldn't find tenants and were forced to sell up. The latter appears to be the fear in the Treasury, justifying the introduction of Section 24, even though this flies in the face of the evidence that the average landlord is significantly lower geared than owner-occupied, and is often a cash buyer, and that landlords are less likely to sell than owner-occupiers if interest rates rise, because they don't have to cover the increased costs from their earned income or savings (the tenants generally pay, even if the landlord is forced to cut rents to attract viable tenants).
There's also the issue of all the inherited wealth that is going to be passed down as the Baby Boomers and their parents die off, or seek to reduce the size of their estates and avoid inheritance tax over the next 20 years. Much of this money is going to end up invested in property, resulting in higher prices (and price support during a recession) and more private rentals and second homes, again constraining supply, restricting price falls, and widening the gap between those children who inherit substantial wealth and those who are forced to rent long-term, and possibly for their whole lives, as so many people do in, say, Germany or Switzerland.
So to my mind, focusing just on the supply of new houses as a method of constraining house price inflation is too simplistic. To really improve the affordability of house prices long-term, you would need to make housing less attractive as an investment and store of capital: by taxing inherited wealth harder, for example, especially if it is re-invested in property; by hitting landlords and residential investment companies with increased taxation and other policies; and re-introducing capital gains tax on principal private residences, as used to be the case before 1965. The latter policy would definitely constrain the perception that house prices are a one-way ticket, the famous "ladder", and encourage people to invest in more economically productive alternatives than property, such as starting their own business, in local companies offering their own shares or bonds, in government gilts or commercial bonds, and in UK companies via the stock markets.
Shortage of housing is another way that is boosting the profits of the big developers, so in effect this looming crisis will never be solved or never want to be solved and as a knock on effect, affordibility is a long long way away for the honest couple saving for their 'first' dream home.
If any government is going to tackle this problem and improve affordibility, it needs to be very large and long-lasting and not just some 2 day mention in the commons.
Jed FazalSpecialist in Guaranteed Rent & Property Management services