Opinion: Housing market latest update (again!) – Tim Jones

I make no apology for revisiting this topic. A stable housing market with a good balance of supply and demand is essential for the growth of the Northern Devon economy and for its communities.
In areas of the country where there is poor supply, this has a deep impact upon local businesses. It also has a negative effect on those who are looking to invest in an area.
While I deliberately avoid involvement around politics, it will not be lost on you that the Labour Party manifesto has picked housing as one of its key policy changes. They have promised to build at least 1.5 million new homes in the next three years if they are elected.
They are also proposing sweeping changes to the barriers which prevent houses being built, such as, inordinate delays in planning and constant objections from nimby groups.
There will be some within our area who are concerned about the impact this might have on our precious landscape. This is however the time to consider the big picture. To make sure that the next generation have access to housing of their choice.
It is the time to consider what considerable economic benefits will arise from an increase in levels of house building. Most of this will benefit local businesses – contractors, employees and suppliers.
Whatever your views might be on the subject there is no doubt that an urgent debate is necessary. The whole programme of house building is slowly grinding to a snail’s pace.
The latest figures indicate the scale of decline. House building is now running at its slowest pace since the credit crunch of 2009 (excluding the pandemic).
Undoubtedly a major reason is the delays in securing a planning consent. Currently this process can take five years or more from the start of a planning submission.
If we add in to this the aggressive rise of interest rates designed to tame inflation, this has now curtailed demand forcing house builders to mothball developments and slow their building rate for new houses.
The annual target is supposed to be 300,000 new houses per year; many in the industry now reckon that we will struggle to deliver 150,000 in the next 12 months. This is way below what we need to satisfy demand, particularly for those who are first time buyers.
Logic would suggest that if there is a shortage of supply and high demand then this would mean that house prices were rising. In practice, however, the reverse is the case.
The effect of 14 increases in bank base rate since December 2021 from a record low of 0.1 per cent to a 15 year high of 5.25 per cent, means that the cost of an average mortgage is at its highest for 15 years. This does not affect demand but it does mean that, for many, mortgages are unaffordable.
The result of this is that house prices have fallen at their fastest annual pace since 2009 and are now down by more than five per cent.
For many new estates, viewings have been reduced to a trickle. Most prospective purchasers now regard asking prices as an indication only and are routinely making cheeky offers of between 10 to 20 per cent below the price quoted.
The focus therefore for those seeking accommodation is upon finding a home to rent. This market has quite simply run out of control. It is estimated that rents have risen by another 10 per cent over the past year.
Estate Agents dealing with rented properties report that rents are rising at the fastest pace on record. In some of the major towns throughout the country agents are reporting enquiry levels which are five times higher than before the pandemic.
It would also be logical to conclude that demand at this level would encourage more investment in buy-to-let properties. Sadly, however, this is not the case, in fact many small landlords (who completely dominate this market) are selling up because they are facing rising mortgage costs. They are also encountering significant changes in rent controls and the ability to evict tenants.
There are also a whole series of new building regulations which need to be complied with in respect of health and safety, cladding and energy efficiency.
It is apparently not uncommon therefore that landlords will quote a rent and then invite prospective tenants to bid for the property at a higher figure than they are quoting. Many of our young people are now being forced either to remain living at home or to rent a room rather than a house.
All of this means that we as a country are slipping down the league tables. Houses in England are now the worst placed in Europe for home buyers. This is because our houses are less affordable and of a lower quality than those in every other European country.
The figures that support these conclusions found that 20 per cent of English households spend more than 40 per cent of their take-home pay on housing costs. This is more than double the European average, which is at eight per cent. This means that roughly 11.3 million people in the country are in this spending trap.
The current government seem unable to get any effective policies going to reverse these trends. In fact, they have made matters worse by removing the ‘Help to Buy’ initiative.
The publicly funded housing associations are still only able to develop a fraction of the overall number of units we need.
This is truly a crisis; please expect some fireworks over the next few months. Inevitably, there will be some dramatic changes whoever is in control in Westminster.