Property is a perennial hot topic in the UK as is the plight of first-time buyers and lower-income workers, who struggle to get on the proverbial “property ladder” due to the difficulties of saving for a deposit while paying rent and watching house price continue to rise. Various governments have tried various ways to tackle this issue and yet it continues, for one simple reason.
Markets are governed by the laws of supply and demand
That’s the straightforward truth of the matter. Where supply outstrips demand, prices fall and where demand outstrips supply, prices rise. In the UK, there is generally a strong demand for housing because the mainland UK is a densely-populated island, however the extent of the demand can vary hugely depending on the characteristics of different geographic locations. For example, London has long been (in)famous for its exorbitant house prices, with flats, literally the size of cupboards, being put on the market for eye-watering prices and, much of the time at least, a general feeling that just when you thought prices couldn’t go any higher, a property comes along which sets a new record. Meanwhile, in more rural parts of the UK, you can still buy substantial detached properties with land for less than the price of some London studios. As previously mentioned, it’s a simple case of supply and demand.
In the housing market, the issue of demand goes in tandem with the issue of affordability
As the old song goes, you can’t always get what you want and it’s hard to imagine an area where that saying is more true than in the housing market, particularly in housing hot spots such as London. If you can’t afford it, you can’t have it and in terms of housing, for many people “affording it” means getting a mortgage, which requires both a deposit and the ability to demonstrate that the borrower can afford the repayments over the long term, even if interest rates rise. Higher house prices mean that buyers need bigger deposits and higher incomes before they can expect to be even seriously considered for a mortgage. This increases the challenge on people paying rent while saving for a deposit and, of course, the challenge is felt most acutely by those on the lowest incomes, particularly if the proverbial “bank of mum and dad” is unable to help. Over the years, governments of all persuasions have tried various tactics to address this issue, from obliging builders to create a certain percentage of affordable housing to the “Help-to-Buy ISA” to the recent cut in stamp duty for first-time buyers, however, while these measures may put one group of buyers at an advantage when compared to another group of buyers, they do nothing to address the fact that the UK has an acute shortage of housing stock.
Building more homes
Pledges to build more homes have regularly featured in manifestos and budgets for many years and, indeed, featured in the latest budget in which Philip Hammond promised no less than £44bn in overall support for a home building programme, which the government expects to last into the middle of the next decade. This does, however, raise the question of where these homes will be built. Home prices are at their highest in places such as London and the surrounding Thames Valley area precisely because there is such a shortage of land on which to build. The Chancellor has taken some tentative steps towards addressing this, such as by making it possible to issue compulsory purchase orders on land developers have banked for financial reasons and promised a “review” of why requests for planning permission can find themselves subject to delays. If, however, affordable property is to become a reality for the majority of people in the UK, then much more needs to be done to unlock potential building land and to maximize its usefulness for development.