Today the National Housing Federation published a damning report on England’s housing market, describing it as “distorted and dysfunctional,” with research by Oxford Economics predicting that house prices will rise by up to 40 per cent in the next five years.
Gordon Brown has already recognised the severity of the crisis, prioritising the building of affordable housing in his first legislative statement as prime minister in July.
We are so confused about housing in this country. We want to own a house not rent a flat—low density living is the norm across the UK, even in London, which is the least dense large city in Europe—but we want to preserve the green belt. And what about all those empty properties (some 700,000) and the undeveloped land the developers are sitting on? Should we continue to let City bonuses and foreign investment skew the market in the capital? Should we tax underoccupancy? Should we tackle the collapse of confidence in pensions which has encouraged the rise of the house as pension?
But is there a crisis anyway? Simon Jenkins reminds us that the key figure for first-time buyers is not the purchase price of a house, which they will probably sell long before they have paid for it, but the cost of the monthly mortgage repayments. Median housing payments for first-time buyers, he says, were 16 per cent of income in 1975, 18.4 per cent in 1980, a huge 27 per cent in 1990, 14 per cent in 2000 and 16.8 per cent last year.
With interest rates increasing, however, the ratios are worsening. Over the first half of this year, repossessions have averaged 77 houses a day, a 30 per cent increase on the same period a year ago. Although the number of repossessions is still well below the levels seen in 1991, when 76,000 properties were repossessed, at a rate of 208 every day, the trend is worrying.
Look out for a forthcoming blog series in which Harvey Cole dismantles some myths surrounding our housing market.