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Does Britain really face a housing shortage – MoneyWeek

Does Britain really face a housing shortage – MoneyWeek

Sonoharmdonethen?

Notquite。

Thelastgovernment,convincedoftheneedtobuildlargenumbersofnewhomes,promisedthreemillionofthemby2020。

Tominimisedamagetothecountrysideandgreenbelt,theplanwastobuildthebulkofthemathighdensitiesonbrownfieldsites。

Butindrawingupthelegislation,privategardensincitieswereplacedinthesamecategoryasdisusedgasworksandrailwayyards。

Developerswereall-tooeagertotakeadvantage。

Gardensoftenprovedcheaperandeasiertobuildon,anddevelopersfounditrelativelystraightforwardtogetpermissiontobuildhigh-densityblocksofflatsonurbanplots。

Inall,gardengrabbingaccountedformorethanhalfofallnewhousingbetween2005and2008,accordingtofigurescitedbyTheEconomist。

SothedecisiontomakeithardertodohasrevivedtalkofacatastrophichousingshortageinBritainthatisdestinedtokeephousepricesrisingindefinitely。

Isthereahousingshortage?

AllthreepoliticalpartiesagreethatBritainfacesashortageofnewhomesduetoitsrisingpopulationandariseinhouseholdnumbersasmorepeoplelivealone。

TheOfficeforNationalStatisticssaysthepopulationwillgrowbymorethanfourmilliontonearly65millionby2020,ofwhichalmost12millionwillbeagedunder30。

Thenumberofnewhouseholdsgrew4。

2millionbetween1981and2008evenasthepopulationgrewbyjust1。

8million。

YettheUKbuildsfewernewhomeseachyearthanalmostanywhereelseinEurope。

Howmany?

DespiteGordonBrowns2007pledgetobuildthreemillionhomesby2020(240,000ayearby2016),only206,000werebuiltthatyear。

In2009thefigurefellto123,000,thelowestfor83years。

Therearesomesignsoflifeinthehousebuildingsectorastheeconomyemergesfromrecession;butnosignofanewhomesboom。

Besides,thepropertiesthatarebuiltareoftenthewrongsort。

Forexample,theaveragepriceofaone-bedflatdroppedfrom£565persqftin2008to£520lastyear,whilethepriceforathree-bedflatjumpedfrom£550to£615。

Somorebuyerswantlargerhousesandflats。

Yetfewarebuilt。

Whereisthataproblem?

Londonisthemostobviousexample。

Aselsewhereinthecountry,thebuy-to-letboomandunder-supplyofavailablelandhaspusheddeveloperstowardsbuildingsmallflats。

PropertyconsultantsDriversJonasDeloitte(DJD)warnedlastmonththatthebuildingoffamilyhomeswillhithistoriclowsincomingyears。

Adecadeagohousesmadeupathirdofallbuilding,butthatfigurehasfallentojust5%,whileone-andtwo-bedflatsaccountfor77%ofthetotal。

Accordingtotheirsurvey,just155newhousebuildsareunderwayininnerLondonandonly1,100housesinLondonasawhole。

Sowillhousepricestakeoff?

AccordingtoDJD,theshortagemeansarealstokingupofhousepricegrowthin2012-2013。

Buttheymaynotberight。

Anoversupplyofsmallerpropertiessuggestsahousingmarketthatwillcontinuetofragmentintomoresectors。

AnecdotalevidencefromLondonsestateagentsisthatsmallerflatsremainfarhardertoshiftthanhousesandlargerflats。

Meanwhiletheideathatashortageofnewlybuilthomesmustleadtohousepriceinflationfailstoaccountforthehundredsofthousandsofhomessittingempty。

ArecentsurveybyTheGuardian,withinputfromtheEmptyHomesAgency(Emptyhomes。

com),putthefigureat450,000。

Othersourcesquote850,000。

Moretothepoint,duringthecreditboom,pricesroseacrosstheUK,evenintownsandboroughswherethepopulationwasfalling。

Andrentshavenotrisenatthesamerateasprices,whichyoudexpecttohappeniftherewasagenuineshortage。

Thissuggestshousepricesarebasedmoreontheleveloffundsavailabletoprospectivebuyersthanonanyshortage。

Herethesituationlooksbad(seebelow)。

Latestmortgageapprovalfiguresshowaquarterlydropof18%。

Inthelong-term,Britainmaybeshortoftherighttypeofhomes,butthatwontbyitselfprotectpricesfromanotherfall。

Theongoingcreditcrunch

AsGeorgeHayarguedrecentlyonBreakingviews,evenifpotentialdemanddoesholdup,freshcreditwillremainscarceasUKbanksfacea£300bnfundinggapwhenthegovernmentwithdrawsliquiditysupportmeasuresnextyear。

GeorgeOsbornesplanstogivetheBankofEnglandmorepowerstocontrollendingseemlikelyfurthertorestrictsupply。

Andmanyover-leveragedborrowershaveonlyavoideddefaultingsofarbecauseinterestrateshaveremainedathistoriclowsandtheyhavekepttheirjobs。

Butwithpublic-sectorcutsloomingandinterestratesalreadyrockbottom,thepressureonhomeownerscanonlyincrease。

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