House prices can be contained by common sense

By Philip Macdonald, managing director of Abbotts

Last year only 142,000 homes were built in the UK, the smallest number since 1923, yet our population continues to expand, and, increasingly, more people are living alone for longer  – so is it surprising that we have a housing crisis? In August only 18,300 mortgage loans were granted to first time buyers, the average age of whom is now a staggering 37. Added to which, house prices have virtually doubled in the last decade, and the credit crunch left some people in negative equity, whilst others now fear that they can never get onto the housing ladder because lenders are demanding such large deposits. A recent Channel 4 report appeared to be blaming Buy to Let landlords for stealing a march on first time buyers by mopping up the smaller properties, but this sector of the market wouldn’t be booming if there weren’t a demand! The private sector is filling a housing need gap which the public sector cannot, and also meeting demand for good quality rented accommodation amongst the professional under-35s. Housing Minister, Grant Shapps, admits that his powers are limited, but he hopes that, by keeping interest rates low to make mortgages more affordable, and by addressing planning legislation and building regulations to make it easier to build homes where they are wanted, the problems which have dogged the housing market for the last couple of years can be eased. He reaffirms the need for people to buy homes to live in, rather than as ‘investments’ but, when interest rates are so low, anyone with some spare cash is quite likely to – yes, you’ve guessed it – want to invest in a Buy to Let property. This is something parents are doing in university towns all over the country, allowing their student sons and daughters to live rent free whilst sharing with other students who do pay rent, covering the mortgage. Like all of us, Mr. Shapps is hoping for a period of financial stability, without a distorting housing boom. Now where have I heard that before?? As an old hand in this fascinating industry, I have seen booms crumble to ‘bust’ too many times before; a thriving housing market is good for our economy but it does need to be contained through sensible lending policies. House prices can also be contained by government, via local planning authorities, not making unacceptable financial demands on developers to deliver vast infrastructures as part of their schemes, including up to 40% affordable housing, contributions to schools, culture, health; you name it, the last government expected it – yet who pays? The vendor of the land on which a new development is to be built (the higher the demands, the lower the value of the land); the developer, and the people who buy the new homes. This policy of extortion is, I believe, one reason why house prices got so out of hand in the years up to 2007 and, why we are where we are today with many developments facing uncertainty in receivership, creating a blot on the urban landscape. Fairness is a word being bandied about as we absorb the implications of the Comprehensive Spending Review, and it is not fair to burden housebuilders and their customers with unacceptable additional costs for the ‘wider benefit’ which have little or no direct relationship to individual schemes. If we want our industry to fully recover, creating jobs in specialist building trades, as well as all those businesses which serve housing, from legal to furnishing manufacturers and retailers, removal companies and independent decorators, gardeners and DIY stores, we need to see some common sense at government level. Developers are not merely cash cows and substitutes for government investment, they are vital to the wellbeing of our communities, in creating quality homes for people to live in and enjoy for generations. The sooner this is properly recognised, the better. 

Philip Macdonald is on 01284 704815.

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