On one side of the equation we have demand – a growing and aging population, more single occupancy homes, more buyers coming from overseas. On the other side we have supply: too few homes for sale, too few new properties being built, too few skilled craftspeople, unwieldy planning legislation. The result: house prices up 6.1% to the year ending September 2015, according to the Office for National Statistics. PWC’s chief economist John Hawksworth declared that house price inflation in the UK is now running at twice the rate of average earnings.
So, how to solve the housing crisis, if indeed it can be solved? In last week’s Comprehensive Spending Review, the Chancellor George announced a range of measures to tackle the problem: building up to 400,000 affordable new homes by 2020, 200,000 of which will be so-called starter homes; boosting shared ownership, capping the price of new starter homes, increasing Stamp Duty for buy-to-let properties. Taken together, these measures may narrow the gap between demand and supply but they will not eliminate it.
A few days prior to Osborne’s speech, Conservative think tank the Bow Group issued a paper arguing for heavy restrictions to be placed on overseas buyers who, the group argues, are distorting the property market, particularly in London. The ideas themselves aren’t new; their proposal by a Conservative organisation is.
Looking back to the 2010 general election, the Conservatives were, I believe, judged on their ability to solve the financial crisis. Today, it is their ability to solve the housing crisis that is dominating an increasing number of newspaper editorials and comment pieces. The UK’s housing market seems to be looking increasingly jaundiced. Can the Conservatives prescribe the right medicine to coax it back to health?
The question of whether or not our housing market is broken is an important one. Our media is focused on hothouse conditions in London so it’s easy to forget that in rural Wales or the central belt of Scotland, most estate agents would barely recognise the drama being played out in the smart thoroughfares of Mayfair and Maida Vale. Where one stands in the country has a huge impact on one’s perception of the housing market’s effectiveness.
But whether it’s seen from Notting Hill or Nottingham, the tensions within the market are undeniable. Today, we have to accept that a government will not be judged on its ability to solve the housing crisis, but rather its ability to manage the situation and prevent any further deterioration. This is not something most governments would choose to say publicly but increasingly the Conservative’s housing policies suggest an administration seeking to stabilise the patient rather than cure it.