UK Housing Crisis Isn’t Supply Problem

Conventional wisdom maintains that the bubble in UK home prices is due to inadequate supply. Conventional wisdom is wrong. Despite tough British planning laws, the shortage of housing across the country is not acute. Overvaluation is largely the result of ultra-low interest rates. Low interest rates may be with us for a while. Relative to income, house prices have never been as unaffordable as they are today. Is a shortage in new homes to blame for the high prices? Last year, housing completions in the United Kingdom rose to just over 150,000. That’s 30 percent less than the average number of housing units completed annually in the 1980s. The solution is simple, say the pundits: Britain needs more houses. Planning regulations should be relaxed. Yet if high home prices were really the result of shortages, more people would be squeezed under the same roof. Read more on the Reuters website.

Here Are Some Possible Solutions To Britain’s Housing Crisis

The housing crisis facing the UK, and particularly London, is rarely out of the news. While those on lower incomes cry out for suitable homes, we’re facing a growing house price bubble, an oversupply of luxury flats, and a government obsessed with home ownership at the expense of renters. The causes are numerous and well-rehearsed; but the solutions are less straightforward. UCL recently gathered an expert panel of housing experts and a number of possible solutions were suggested.

·         Change the tax system to encourage building

·         Designate land use for different types of housing

·         Build on the greenbelt

·         Improve other things that make a house worth living in

·         Mobilise generation rent

Read more details on the CityMetric website.

How Help to Buy Helped To Fuel Property Bubble

The Chancellor declared at his Mansion House speech that the government’s Help to Buy scheme “is not fuelling house price inflation in London”. This statement demonstrates either political hyperbole or that the Chancellor needs to brush up on his basic economics, for it is just plain wrong. There is clear evidence that the Help to Buy scheme has played a role in fuelling the London property price bubble. The government’s defence of Help to Buy has been vigorous, spurred by the belief that this is a vote winner. Ministers assert that only 5% of Help to Buy mortgages have been in London (and account for less than 1pc of London mortgages). The average mortgage borrowed nationally under the scheme was £152,000, below both average house prices and the £600,000 limit of the scheme. The government is presenting this as evidence that Help to Buy does not equate to the increase in house prices either in London or in higher priced property brackets. Read more on the Daily Telegraph website.

Bank of England Warning On Housing Bubble as Prices Rise

One of the Bank of England’s most senior figures has warned homebuyers that there will be a clampdown on house purchases if there is any evidence that increasing prices are spiralling out of control. Andrew Bailey, deputy governor of the Bank and the man charged with ensuring financial stability in the UK, said the housing market was one of the key issues for 2014. He said controls could include strengthening the tests potential buyers have to go through before they are offered a mortgage and increasing the amount of capital banks have to hold against household lending. Read more on the Daily Telegraph website.

We Are In a Housing Bubble, Claims Economics Professor

Most regions of the UK are already in a house-price bubble, according to an economics professor from Warwick University. Prof James Mitchell said house prices were overvalued when compared with incomes, raising the risk of a fall at some stage in the future. Of 13 regions in the UK, he said 10 were currently overvalued. "The results raise the risk, although not the certainty, that house prices will fall," said Prof Mitchell, although he said it was difficult to say when that would be. "But a bubble it appears to be and we should all - householders, business people and policymakers alike - be alert to this risk." Read more on the BBC website.

'Bubble' Warning, After UK House Prices Rise Again

A senior economist has warned about the dangers of a house price bubble, following figures that show prices are surging. In its latest monthly survey, Nationwide said prices across the UK are now 5.8% higher than this time a year ago. That figure is up from 5% only a month ago. Howard Archer, the chief UK economist with IHS Global Insight, warned that policymakers need to be vigilant. "The acceleration in house prices...will fuel concern that we could be on our way to a new housing bubble," he said. Read more on the BBC website.

Cameron Brings Forward Help to Buy

A controversial scheme allowing people across the UK to take out 95% mortgages will be launched next week - three months earlier than planned. PM David Cameron made the announcement as the Conservatives gathered in Manchester for their annual conference. He told the BBC's Andrew Marr show the market was "recovering from a very low base" and first-time buyers needed help to get on the housing ladder. "As prime minister I am not going to stand by while people's aspirations to get on the housing ladder are being trashed." He rejected concerns - raised by Business Secretary Vince Cable among others - of an unsustainable boom in house prices, particularly in the south-east of England. Read more on the BBC website.

We Need To Keep an Even Closer Eye on Help to Buy

It’s good news that the Bank of England is being given more power to curb Help to Buy if it looks like the scheme is fuelling a house price boom.  The Bank's financial policy committee (FPC) will review the scheme every year and could recommend that the £600,000 cap is reduced. If there is evidence that Help to Buy is increasing prices rather than supply then government should consider amending the guarantee scheme or even scrapping it, either across the whole country or targeted by areas based on what the evidence shows. If the government really wants to make housing more accessible and affordable, it needs to commit to a more active role in building new homes. Read more on the CIH website. 

Help To Buy: Osborne Gives Bank of England Scope to Rein in Boom

George Osborne is to give the Bank of England greater powers to prevent the government's Help to Buy scheme causing a property boom.  Fears have been raised that the attempt to kick-start the market could result in a house price "bubble", with the market overheating and borrowers over-stretching themselves. This is of particular concern in London where prices have risen by around 10% year-on-year. From January, the Help to Buy initiative will provide mortgage guarantees on properties worth up to £600,000 but the Bank's financial policy committee (FPC) will make annual reviews and could recommend that the cap is reduced. It was initially due to assess the scheme after three years. Read more on the Guardian website.

Record Number of Estate Agents Signals UK House Price Bubble

A record number of people work in estate agents offices and the sector is growing so fast that it amounted to the fastest growing part of the national workforce in the three months ending in June, according to official figures. The Office for National Statistics said that 562,000 people are employed in real estate in the UK, the largest number since records began in 1978, with 77,000 joining the industry over the last year – data that added to fears that the country is heading for a house price bubble.  Read more on the Guardian website.

Help to Buy Could Cause 11% Rise In House Prices

Lenders have issued a stark warning to government that Help to Buy could send house prices soaring to 2007 levels today.  Research by the Intermediary Mortgage Lenders Association shows nearly 60 per cent of lenders and brokers believe a house price bubble could undermine the success of the scheme. The research shows lenders already anticipate a 2.7 per cent increase in the average house price by the end of the year, pushing it to £166,418 according to the Land Registry house price index.  Read more on Inside Housing.

Cable Warns Help to Buy Could Trigger New House Price Bubble

Vince Cable has warned that the Treasury's Help to Buy scheme could trigger a house price bubble.  The business secretary said he was worried about the scheme's possible impact. The policy could make it easier for people to obtain mortgages, but would have to be designed properly to minimise the potential risks.  Cable was talking about the scheme's mortgage guarantees on house purchases worth up to £600,000 that will come into effect in January next year. Another arm of the scheme, offering loans to people who buy newly built houses, was launched in April, but Cable said concerns had not been raised about this.  On the mortgage guarantee scheme, he said: "I did warn about it, and I am worried about the danger of getting into another housing bubble. If it's properly designed, it could be a useful addition.”  Read more on the Guardian website.