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Posts tagged ‘property markets’

It’s Time to Consider Property Taxation in the Round

Mark Stephens argues that Scotland’s new system of housing transaction tax should be allowed to bed down, but that as the Parliament’s Finance Committee considers “A Scottish Approach to Taxation” it should consider property taxation in the round.

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Rethinking Planning: The Interface with Spatial Economic Forces

Colin Jones explains how planners need to shape, rather than fight market forces in order to improve living conditions and achieve social goals.

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Independence and its Impact on the Scottish Property Market

I hope you will forgive me for starting with my conclusion, that independence would be bad for the Scottish commercial property market.  Indeed, what I want to do is to signal to you that I think it would be not just bad but catastrophic. Read more

Scottish Independence and the Property Market

As the independence referendum approaches, the implications of independence for the property market and vice versa has not received any attention. The real estate sector is a major component of the Scottish economy, from new construction through to investment finance. Read more

Professor Colin Jones speaks on Radio 4’s “You and Yours”

There are fears 'help to buy' will artificially inflate prices, and that's at a time when early indications are that in some parts of the country at least, house prices are already on the rise. Colin Jones was a member of the discussion panel on BBC Radio 4 programme which discussed the current housing market context, the government’s “Help to Buy” initiative and the regulation of the private rented sector.

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Charity Shops: Does every little really help?

Continuing on from her first piece ‘Charity Shops: Curse or Crux of the High Street?’, Dr. Nicola Livingstone reflects on the retail character of these shops in the twenty-first century. Are charity shops and their drive towards profit maximisation proving effective in achieving increased income for their relative causes, or are they caught-up in the quagmire of competition, constantly changing to remain relevant?

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IHURER seminar: Applying spatial econometrics to cross-sectional housing data

Our next IHURER seminar will take place Wednesday, 12th of June. Read more

$ markets the spot

We live in a period where free market dominance is being openly questioned in terms of efficiency and sustainability – among other reasons. No doubt this has a lot to do with the financial crisis’ effect on every economy in the world, which is then retransmitted and multiplied due to globalization. Even the most fortified and/or isolated systems felt the disturbance knocking on their door. Read more

Optimism Returns and who’s afraid of the Big “Bad” Greek State?

Under a climate of a somehow promoted, and highly advertised, general optimism, Greek real estate is starting gradually to pop its head up – still afraid of another haircut. Some experts even dare to forecast a new beginning for the, until recently, dead Greek real estate market, before the end of 2013. Read more

Charity Shops: Curse or Crux of the High Street?

Does twenty-first century charity now begin on the High Street? It is surprising to see a High Street today without any charity shops; they have become ubiquitous to our retail landscape. Dr Nicola Livingstone questions their evolution, considering whether they are a curse or a crux of the High Street.

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New book: “Office Markets and Public Policy”

Professor Colin Jones’ latest book has just been published entitled, “Office Markets and Public Policy” by Wiley-Blackwell. This is the first book that looks at how offices and office markets in cities have changed over the last 30 years.

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Trickling trickle down UK housing policies?

Professor Colin Jones

In November 2011, David Cameron promised a package of policies to “get Britain building again”. Colin Jones, Professor of Estate Management at the IHURER research institute explains why housebuilding in the UK still fails to keep pace with population growth.

A UK government report in 2007 noted, “For a generation, the supply of new homes has not kept up with rising demand.”  The veracity of this statement is reinforced by the 2011 Census that reported a 7% increase in the population of England and Wales and 5% in Scotland over the previous decade.   An increase that was much higher than expected.  Meanwhile 2007 turned out to be the peak year for UK house building and annual completions fell by 43% by 2010-11 following the credit crunch.

New house building in the UK was 146,460 units in 2011-12 which was the second lowest total (the previous year was the lowest) since 1924.  The quarterly statistics on completions for 2012 published so far suggest that this financial  year is on course to be even lower than 2010-11.  In other words a new low.  House building is simply not responding to demand in the short or long term.

The essential direction of the balance between house building and demographic change has been acknowledged in the policy pronouncements of the Coalition.  The government offers all the right sound bites.  In November 2011 David Cameron said, ”We are determined…to get the market moving” and “get Britain building again”.     The policy package that accompanied these statements became live in April 2012:

  • A stimulus to the Right to Buy in England by increasing discounts to a maximum of £75,000 was designed to generate funding new funding for affordable housing.  (The government calculates that for every council house sold the funds will be sufficient to build a new affordable home).
  •  A mortgage indemnity scheme enables buyers of new homes to borrow up to 95% of their value. The government underwrites part of the associated risk.  (The previous government’s policy of exempting first-time buyers from paying stamp duty on homes valued up to a £250,000 threshold lapsed at the end of March 2012.)

Both these schemes are attractive because they effectively cost the government nothing in the short term. There have also been changes to the planning system to stimulate new building.

The government has high hopes for these policies and they were trumpheted in the list of achievements in its Mid-Term Report. At the announcement of the indemnity scheme it was billed as potentially helping 100,000 people in England.   However, in the first three months it supported only 250 new house buyers.  It was anticipated by the government that the changes to the Right to Buy would stimulate an additional 20,000 sales over its first three years.  Given that there were only 3720 such sales in 2010-11 and that the number had been broadly unchanged for the previous three years too this forecast appeared to be wishful thinking.   Indeed actual sales in the first half of the latest financial year were only 1487 so the numbers are falling not rising.   The government appears at best optimistic about these policies in the short term.  And of course it will be some time before receipts from sales can be translated into new affordable housing.   This also applies to the planning changes designed to stimulate new building.

But the problem is not just about the low numbers of new houses and the associated nimbyism and planning regulations.  The picture is worse than it appears because of the types of houses being built.   Look first at the private sector.   In the late 1970s and 1980s the private house building industry focussed on starter homes offering small cheap flats and houses, but the house building industry working model is now generally high price, high mark up and low output of family homes and ‘luxury’ city centre flats.  The average price of a new terraced or semi-detached house is £200,000, beyond the reach of most households even with just a 5% deposit.

Meanwhile with public sector expenditure reductions there has been an invigorated effort to make public sector subsidies (and now right to buy receipts)  go further by reducing state support for new housing built by housing associations.  In effect this has meant a redefinition of affordable housing provided by this sector.  The result is that this publicly supported housing will need to charge much higher rents than traditionally for social housing, the order of 80 to 90% of market rents.   Whilst ostensibly aimed at ‘areas where there is a demand for affordable housing’  the new schemes need to be in localities where they are viable, and these are not necessarily be those that have the greatest need.  These new properties also attract professionals currently housed in the main stream private rented sector at rents that are equivalent to mortgage repayments.  Indeed the advertisements for completed schemes note priority is given to applicants on high incomes that do not require housing benefit, and households do not have to be an existing social tenant or even on the waiting list.

houses_arebuiltThe consequence is that new housing supply is offering an increasingly narrow menu – the dominant private sector is building for sale primarily at the top end of the market for high income families and the state is supporting housing at rents just below market levels to households who until recently would have bought.   The policy language is all about helping households on to the housing ‘ladder’, and is implicitly a trickle down solution to the housing problem.  Within this perspective new houses built at the top end of the market are bought by the rich who then vacate houses that are smaller/lower priced  for the next lower income group to move into, and so on down the housing market chain.  So the new affordable housing for rent at near market rents reduces the pressure on social housing indirectly by building housing for richer households.

Unfortunately there are a number of spanners in the argument.  The mythical housing ‘ladder’ has first time purchasers buying a cheap starter home and gradually progressing by trading up.  Yet the ladder is something of a mirage as many two income professional households start well up the ‘ladder’ and trading down can be a reality for many households.   Family wealth is also an important influence on demand via mum and dad helping with the deposit or from inheritances.   Any housing market chains created by these new government policies are likely to be very short, at best simply creating more space in the private rented sector for the squeezed middle,  “Generation Rent”.

Many of the young people who are struggling to afford a home of their own will not be able to afford the mortgage payments on an expensive new home, even with a 5% deposit.  The trickle, and a lagged trickle at that, of new houses generated by these policies will not keep pace with demographic growth and have only a marginal direct benefit to “Generation Rent”,  and most importantly offer no indirect help to housing the poor.  These trickle down policies may cost very little but they also achieve very little.   They will not get the ‘housing market moving’ or ‘Britain building’.

Colin Jones is professor of estate management.  His publications most directly linked to this blog are:

“The UK Housing Market Cycle and the Role of Planning: the Policy Challenge following the Financial Crisis” chapter in C Jones, M White and N Dunse (editors) Challenges of the Housing Economy: An International Perspective, Wiley-Blackwell, Oxford, 2012.

Jones C and Murie A The Right to Buy, Blackwell, Oxford, 2006.

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