Is A Lack of Supply Not The Key Housing Market Factor?
25th September 2019 posted in Sellers
While it is quick and easy to blame Brexit for any trouble you experience in the property market, it is far from the only reason. One of the biggest problems with the UK property market is that it is difficult to find agreement between the experts. When you don’t have an understanding as to what the problem is, it becomes nigh on impossible to find the solution.
Even the experts have been coming under fire of late. For many people, the Halifax price index is an essential asset in studying the property market. However, there has been a criticism of late, with some people stating recent indices have been unreliable and even unlikely. With Halifax showing different results from other sources and indicators, many have questioned their approach.
Not everyone agrees with Halifax Price Index
As you would expect, Halifax have defended their approach, stating they have used this approach for more than 30 years. However, the newly released figures at the start of September draws on new technology, which the organisation says has been in development for more than a year.
A spokesperson for the company said; “The updated model reflects changes to the structure of the housing market and uses best practice in house price determination. It will include more mortgage transaction data for even greater accuracy and reduced volatility on a month to month basis.”
The most recent index from Halifax states the average house price stands at £233,541 which is an increase of 0.3% on monthly figures. A review of HMRC data for July 2019 indicates there were 86,630 sales; which is 12.4% less than the July of 2018 numbers. Annual house price inflation stands at 1.8%, which is the highest it has been since April of this year. It is likely critics will find a flaw in this return.
For the London borough of Lewisham, the April 2019 sales volume was 179 and for April of 2018, it was 234.
Nationwide figures for the same period states that annual house price inflation is 0.6% and that it has been less than 1% for nine months in a row.
The Managing Director of Halifax, Russell Galley, states, “Although the housing market will undoubtedly be influenced by events in the wider economy, it continues to show a degree of resilience for the time being. We should also not lose sight of the fact that the single biggest driver of both prices and activity over the longer-term remains the dearth of available properties to meet demand from buyers.”
Even if people are willing to accept the Halifax figures, for now, there is disagreement about the key influences on the property market right now. While Halifax acknowledged the impact Brexit has, with “ongoing economic uncertainty” understandably weighing on peoples’ minds, Halifax believes that a lack of supply in the market is the leading factor in the sluggish state of the property market in 2019.
Galley also said; “There was no real shift in house prices in August as the average property value grew by just 0.3% month on month. This further extends the predominantly flat trend we’ve seen over the last six months, with the average house price has barely changed since March.”
Of course, there have been reports which state that scarcity of housing isn’t the leading property in the current UK market. With the latest report coming from well-noted advisers at the Bank of England, a lot of people will likely sit up and take notice.
Bank of England staff members downplay a lack of supply
The report comes from Ian Mulheirn, of the Tony Blair Institute, and it states that there is no shortage of home. The report also suggests the supply of housing has increased at a faster rate than which households are created.
Two Bank of England staff members has examined rising house prices in comparison with the rate of goods in general, for 20 years, in a new paper. If house prices had moved at the same rate as goods in general, there would have been a 50% increase. However, the house price increase has been 60%.
The paper believes that a “lack of supply has had very little role to play” and that “housing hasn’t really got significantly scarcer” in the past 20 years. While the paper states there are regional variations, they don’t believe that the market as a whole has been affected in the way many think it would be. The paper also says that virtually all house price increases since 2000 are attributable to low-interest rates.
While this viewpoint is published with the Bank of England connection, it is essential to realise it is not an official Bank of England statement. The paper was issued on the Bank Underground blog site, which is a platform for staff members to share opinions and back or question current policy.
There will be many people, and recognised experts, who disagree with the findings, but it should be noted that there are many who do. Even in these challenging political times, there is support from different sides of the UK spectrum for this line of thinking.
Andrew Lilico lies on the right of British politics, and he has long argued that there is no housing shortage and interest rates are the critical factor in the inactive state of the property market.
Ann Pettifor, the director of Institute of Policy Research in Macroeconomics, argues along similar lines and states that developing more homes isn’t going to solve the housing crisis.
The Professor of Housing Economics at the London School of Economics, Christine Whitehead, has said; “The story is more nuanced than the Government makes it sound – and at some level, it’s more about affordability than numbers.”
Everyone is entitled to an opinion, and if the view can be backed up by facts, people will listen. For many, the statement which accompanied the Housing White Paper of January 2017, by the then Housing Secretary Sajid Javid, rings true. He said; “This country doesn’t have enough homes. That’s not a personal opinion. It’s a simple statement of fact.”
It can be challenging to keep up to date with opinions from the experts, and to be honest, many of the market overviews aren’t relevant at a local level. If you want to keep up with what is happening in your local area, you must get support from a local expert.
At Hunters Forest Hill, we know selling your home is hard, but we are here to assist you in the process. We also know stepping on to the property ladder is a complicated process. If you aim to buy, sell, let your home or rent property, we are active in New Cross, Peckham, Dulwich and Brockley, in addition to Forest Hill, so get in touch with one of the top three agents in London, and we will be happy to assist you.