According to a new study published on 30th August* The National Housing Federation (NHF) said that “the chronic under-supply of homes” risked locking an entire generation out of the housing market in England, predicting further falls in home ownership rates “to just 68% over the next decade” and even higher rents.
Yet currently according to Right Move we are faced with over 1.3 million homes for sale in the UK, and over 70% of properties that were marketed at the start of the year remain unsold. So what is really going on?
It is true that the construction of new builds are at about half the levels of three years ago – and it is likely that a different mix of housing stock will be required as people’s life expectancies increase and with more single households. The government has responded to this by making thousands more acres of public land available for building and is investing £4.5bn in lower-cost homes via the affordable homes programme. Yet some developers are now focusing on more expensive properties as one and two bedroom flats remain unsold in city centres, so something is ‘out of kilter’.
In reality, there are simultaneous problems on both the demand and supply side. Given the difficulties of raising deposits and obtaining mortgages, developers worry that they won’t be able to sell new homes because potential buyers will not be able to raise the finance. The dilemma is therefore how to escape this damaging cycle, of restricted supply leading to high prices, which then leads to curtailed demand, resulting in unwillingness to build.
The rate of home ownership in England according to the Oxford Economics Report* was over 72% in 2001, but this has fallen steadily to its current rate of 67% and is expected to reduce further as house prices start to rise once again. Rents are also expected to increase by up to 20% over the next 5 years, so young people undoubtedly face an uncertain time in the property market.