This year had barely begun before we had a very true sign of what is to come from the main political parties as we lead up to the General Election on 7 May.
No sooner had most people returned to work on the 5 January then both the Conservative and Labour parties were sending their big hitters into the fray hoping to land some early political punches. The topic on which they were keen to do battle was which of them could be trusted with the UK economy over the next five years.
Clearly, this is a hugely significant issue and is likely to be the key one as many voters make up their mind on who to vote for. However, there are also some other incredibly important battlegrounds which will help decide the result of the election and one of them is the housing and mortgage market – so very crucial to UK plc and an area which has seen a significant amount of political ‘interference’ in the past and, undoubtedly will see more in the future.
To look into the shortage of supply in recent years, especially in England, we conducted our own analysis of Government data recently which focused specifically on the number of births compared to the number of new homes being built. Since 2010 we were able to show that there has been six babies born in England for every new home built since 2010. The reason is that there has been something of a mini-baby boom recently and England’s birth rate in 2012 was the highest for 41 years.
Compared to previous decades, and at a time when house building has been historically low, it’s possible to see the growing pressure in the marketplace for those wanting to purchase. Since 2010 for every new home built, twice as many children – 6.1 – have been born than during the 1950s (2.9), the 1960s (2.7) and 1970s (2.4). It will not take a genius to work out that should the birth rate and new home building rate continue on their current paths then the problems potential first-time buyers are having trying to get on the housing ladder will be even worse for future generations.
That said, there has clearly been progress made in the last couple of years and, quite frankly, this is all down to the boost provided by Help to Buy. Recent figures from the Markit/CIPS UK Construction Purchasing Managers’ Index reveal that the rate of house building is at a higher level than 12 months’ ago and that is clearly a positive. However, the underlying fact is that we have also seen in recent months growth at a slower rate and this has been put down to the fact that Help to Buy building activity was particularly strong last year and the building sector could not continue to match it. The Home Builders’ Federation itself has said it would be hard to maintain the growth witnessed in 2014.
However, the point is that this rate of growth does not just need to be maintained but significantly increased if we are to get anywhere near to closing the ‘housing gap’.
Added to this overall debate is the importance of a continued supply of high LTV lending – house builders will only continue to build if they can see strong availability of mortgage finance. Given that high LTV lending tends to support a big proportion of new home sales – our ‘After Help to Buy’ report in September last year revealed that 40% of new-build sales have traditionally relied on high LTV loans – they will want to be confident that this level of funding is in place so they are able to sell their new developments.
Overall, the Help to Buy scheme has upped the ante considerably however State intervention cannot prop the market up forever. Whatever Government comes to office on 7 May needs to put in place a long-term plan to support far greater numbers of new homes being built and to ensure a more permanent solution to the ongoing problems faced by an increasing number of first-time buyers.
