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Housing market: build, build, build Housing market: build, build, build
(2 months later)
Two numbers sum up one of the biggest problems in Britain today. They are: 240,000 and 108,190. The first – 240,000 – is the rough forecast for how many new homes are needed each year to meet demand; while 108,190 is the actual number of new homes added in England in the last financial year. That shortfall swells and falls, but is always there – and it accounts for the country's housing crisis.Two numbers sum up one of the biggest problems in Britain today. They are: 240,000 and 108,190. The first – 240,000 – is the rough forecast for how many new homes are needed each year to meet demand; while 108,190 is the actual number of new homes added in England in the last financial year. That shortfall swells and falls, but is always there – and it accounts for the country's housing crisis.
Even in the last years of the boom, not enough new homes were being finished to house the people who need homes. And these headline numbers do not tell us anything about the kind of dwellings that were produced: they are no guide to whether (as many allege) a preponderance of shiny one-bed flats were knocked up when what was needed was more family homes. But in essence the housing shortfall is one of the largest drivers of the last boom and it mainly explains why prices are still going up in the neo-boomlet economy of London and the south east. It will not be alleviated to any meaningful degree by the extension of the Help-to-Buy programme unveiled by George Osborne on Tuesday.Even in the last years of the boom, not enough new homes were being finished to house the people who need homes. And these headline numbers do not tell us anything about the kind of dwellings that were produced: they are no guide to whether (as many allege) a preponderance of shiny one-bed flats were knocked up when what was needed was more family homes. But in essence the housing shortfall is one of the largest drivers of the last boom and it mainly explains why prices are still going up in the neo-boomlet economy of London and the south east. It will not be alleviated to any meaningful degree by the extension of the Help-to-Buy programme unveiled by George Osborne on Tuesday.
To restate the basic problem of Britain's property market: not enough houses are being built – and the result has been bubbles, busts, a lopsided economy and misery for many unable to get on the ladder. Serious political parties accept this; think tanks and campaigners dream up new ways to get more homes built – whether that is shredding regulation, taking further chunks out of the green belt or simply spurring the state to invest in public housing. Since the collapse of 2008, however, this coalition has launched scheme after scheme to stimulate more housebuilding: FirstBuy; Get Britain Building; Build Now, Pay Later; NewBuy; Build to Rent. Nearly all of these programmes have tried to increase supply by first pumping up demand, by helping buyers with their finances. That sounds back to front; it has certainly been a failure. Each programme has fallen flat. NewBuy was announced in March 2012 and aimed to help 100,000 home sales. By the end of 2012, according to the Construction Products Association, it had accounted for 1,522 sales.To restate the basic problem of Britain's property market: not enough houses are being built – and the result has been bubbles, busts, a lopsided economy and misery for many unable to get on the ladder. Serious political parties accept this; think tanks and campaigners dream up new ways to get more homes built – whether that is shredding regulation, taking further chunks out of the green belt or simply spurring the state to invest in public housing. Since the collapse of 2008, however, this coalition has launched scheme after scheme to stimulate more housebuilding: FirstBuy; Get Britain Building; Build Now, Pay Later; NewBuy; Build to Rent. Nearly all of these programmes have tried to increase supply by first pumping up demand, by helping buyers with their finances. That sounds back to front; it has certainly been a failure. Each programme has fallen flat. NewBuy was announced in March 2012 and aimed to help 100,000 home sales. By the end of 2012, according to the Construction Products Association, it had accounted for 1,522 sales.
Mr Osborne's Help-to-Buy programme is a continuation of the theme. The scheme is meant to work by underwriting the financing of home purchases – and so, in a roundabout way, encourage housebuilders to put down more bricks and mortar. No one doubts that the scheme will be successful in stirring up the real estate market; but, equally, few seriously believe that it will tangibly push up housing supply. What is in effect a £130bn bung from taxpayers to housebuilders and estate agents has already set some property markets going. According to the British Bankers Association, mortgage approvals this June were 33% up from a year ago. Actual transactions this May were up 15% from a year ago. For a scheme that was only launched in March, this is an extraordinary impact. No wonder housebuilders are reporting bumper financial results.Mr Osborne's Help-to-Buy programme is a continuation of the theme. The scheme is meant to work by underwriting the financing of home purchases – and so, in a roundabout way, encourage housebuilders to put down more bricks and mortar. No one doubts that the scheme will be successful in stirring up the real estate market; but, equally, few seriously believe that it will tangibly push up housing supply. What is in effect a £130bn bung from taxpayers to housebuilders and estate agents has already set some property markets going. According to the British Bankers Association, mortgage approvals this June were 33% up from a year ago. Actual transactions this May were up 15% from a year ago. For a scheme that was only launched in March, this is an extraordinary impact. No wonder housebuilders are reporting bumper financial results.
Such a policy is obviously helping would-be homeowners who want to get on the ladder but do not otherwise have enough of a deposit to do so. But they are not helping those who can't scrape together a 5% down payment on a home in London, say, or those who don't mind letting but find it increasingly expensive. As such Help to Buy marks an implicit admission from Mr Osborne that, for all the tough talk and generous disbursement of liquidity, he has failed to get the banks lending. They should also be seen as rank hypocrisy; the chancellor who likes to say "you can't cure a crisis caused by debt with more debt" is relying on households to do just that.Such a policy is obviously helping would-be homeowners who want to get on the ladder but do not otherwise have enough of a deposit to do so. But they are not helping those who can't scrape together a 5% down payment on a home in London, say, or those who don't mind letting but find it increasingly expensive. As such Help to Buy marks an implicit admission from Mr Osborne that, for all the tough talk and generous disbursement of liquidity, he has failed to get the banks lending. They should also be seen as rank hypocrisy; the chancellor who likes to say "you can't cure a crisis caused by debt with more debt" is relying on households to do just that.
Help to Buy will not increase housing supply by anything like as much as a directed building programme. There is a dire need for more public housing and there are also high unemployment and low interest rates. These are surely all the ingredients for central and local government to start building the homes of the future. Instead, we have another bubble in the making.Help to Buy will not increase housing supply by anything like as much as a directed building programme. There is a dire need for more public housing and there are also high unemployment and low interest rates. These are surely all the ingredients for central and local government to start building the homes of the future. Instead, we have another bubble in the making.
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