COMMENT
Housing in crisis: It’s sink or swim for the property market, says William Jordan.
T
he UK has a rapidly growing housing crisis and something has got to change. In the past few years we have witnessed one of the
greatest quantum shifts in the public’s approach to housing, since the 1960s. For four decades the received wisdom among the UK population was that home ownership was the prime objective of young adults as they sought to put their futures on a favourable course and the apparently relentless rise in home prices underpinned not just their attitude to domestic economics but their attitude to saving, borrowing pension-planning and lifestyle. During the 12 years that preceded the
Lehman Brothers collapse, literally millions of people in Britain, lived well, travelled impulsively and spent beyond their means, using credit card debt secured on the unearned equity in their property. Those who had acquired their former council homes so easily led the charge. Generations of austerity and prudence
were swept away on one simple pretext; that the answer to accumulating debt was simply to move house. The banks and lenders would fall over themselves to give out a 95 per cent, 100 per cent or even a 125 per cent mortgage with which to pay off the debts and start the whole cycle again. It was inconceivable that by 2012, some
41 per cent of people who acquired a home in the preceding 12 months would already have seen its value decline. This change has come as the most profound shock to the younger generation, who have modelled their expectation on their parents and grandparents approach. What they now face is difficult lending criteria, the need to stump up a large deposit and the message in the financial headlines, is ‘Don’t Buy’. A shockwave has travelled throughout
for rent. (Sounds familiar, but different.) Under the plans, institutions and property companies would own these build to rent developments. If this goes ahead, it will mark a
We have reached a crisis of excess demand over supply.
the whole economy; not least through the body of the homebuilding sector. New homebuilding starts of all kinds aren’t even approaching the levels needed to cope with demand, strengthened by large scale inward migration. The rental sector, which historically leant heavily on countless thousands of small private landlords, local authorities and the mutual housing associations, has reached saturation point and thus, we have reached a crisis of excess demand over supply. The great and the good of the housing
world have been gathering, urgently seeking answers. At one such conference in Manchester, the Business of Social Housing conference, organised by North West Business Insider magazine and attended by 130 delegates, the main conclusion was social housing providers should be encouraged to embrace new funding models in order to compete in the future. Now the government plans to cut the
affordable housing budget by 60 per cent in the next four years and social housing providers look to the bond markets to raise cash. The government is exploring the idea of
encouraging developers to build new housing estates where all the properties are
fundamental change in the housing market. With the rising age of the first time buyer continuing to put pressure on the rental market, schemes like this, which bring more property onto the rental market, could help ease the crisis. If managed carefully, this could be a step in the right direction. The question of housing the population
has very much been left to local government and market forces over recent decades. With a wealth of corporate investors, major homebuilders, mortgage lenders and well-funded councils riding on a wave of economic growth and affluence, the market took care of itself, but now all four legs have fallen off the stool. From somewhere, the government has
to find huge new sources of funding, in whatever forms and models it can, to stimulate the construction of very large numbers of homes for rent. The build to rent scheme will help to address this. There’s an entire generation of young
households in the UK that has learned to its great cost that there is no longer any point in home ownership. Reliance on escalating house prices for your financial security and affluent lifestyle is foolishness. Long term renting is set to become
increasingly common and ‘If you need a home, rent one’, is the mantra that will prevail, in my opinion, for at least the next 10-15 years.
William Jordan is Managing Director of residential lettings agency Jordan’s.
Do you have any views to share?
www.propertydrum.com/articles/housingcrisis
PROPERTYdrum MAY 2012 53
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