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The supply focus has to be on family homes – JLM

by: Rory Joseph, director, and Sebastian Murphy, head of mortgage finance at JLM Mortgage Services
  • 23/05/2022
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The supply focus has to be on family homes – JLM
The family home. It sounds such a simple thing but the notion of ‘the family home’ is changing and we are reaching something of a tipping point for our market in terms of its availability.

Supply is a problem within the housing market that is not going to disappear overnight, and it is the very supply-side issues that should caution those who continually suggest we are on the verge of some sort of house price crash.

However, supply has to be broken down into its constituent parts, because for the most part, supply problems are all about the type of properties that are in demand, but are in short supply.

For example, the government appears focused on increasing the supply of properties in the UK. It has set targets of 300,000 new dwellings built every year from the mid-2020s onwards.

However, these properties don’t necessarily have to be the ones that are in demand. The target is for individual units, and what is it easier to ‘build’, ‘develop’, or ‘renovate’ – multiple small flats within converted commercial city buildings, or the thousands of much-needed family homes right across the country?

That 300,000 target might well be hit, but it’s important to look at what those units actually are, because they may not be the three or four-bedroom homes that are in such demand they are seeing significant house price value increases.


Older people need to downsize

If we accept that the UK is unlikely to be building the number of family homes it needs going forward, then where can we source more supply from? One potential answer might lie within existing stock owned by older homeowners who don’t require the space they have.

We currently have a market which is doing all it can to keep those owners in homes which are too big for them. We don’t want to see the end of generational mortgages or equity release products being utilised which allow the owner to stay put, but there will be a huge demographic who would be happy to downsize but see it as too costly to do so.

Hence, why increasingly, older homeowners are accessing the equity in their homes, gifting it as deposits to their family members, and staying put in these properties. If there was an incentive to downsize, these individuals would probably want to take it.

You’ll often hear from individuals about how they are now ‘rattling round a home’ that’s becoming unmanageable, concerned about their increased running costs. They would prefer to move to smaller properties to free up the equity they need and bring to market these perfect homes for the families who also need them.

Whether this incentive could be in the form of not charging stamp duty to owners over 60 who are downsizing, there needs to be a consideration that we have vast swathes of the country’s property stock not being owned by those who most need it.


Right to Buy needs to be done correctly

The government recently suggested reopening the Right to Buy scheme for housing associations. Hugely popular in the 1980s for council house renters, it subsequently came to pass that the money the government made wasn’t actually spent on increasing the supply of homes in other parts of the market, hence supply dropped further. We would be concerned that something similar would happen again.

Any investment has to be in building far more family homes, and while no one is going to turn up their nose at increased yearly supply numbers, if we are not building the right mix of properties, then the supply-side problems are going to go on.

With current and projected demand levels and limited supply, the price of these types of homes is only likely to go in one direction. The building of family homes needs to be the priority.


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