UK housing market in a crisis

A new report from the UK shows an alarming trend in the housing sector. Unlike the USA where there is now a glut of homes, the UK is suffering from a shortage – it is likely to get worse.

According to the report by the Joseph Rowntree Foundation the number of affordable houses in the UK is now at it’s lowest for ten years. At the same time over a third of working housing households under the age of forty cannot now afford to purchase a property.

At the same time the number of court orders for repossessions of property have doubled in the last three years.

The report was carried out by the New Policy Institute on behalf of the Joseph Rowntree Foundation.

As the trend for adults living alone has increased, it has outstripped the availability of properties. The number of households has increased by 35 percent since 1971, even though the population has only increased by 8 percent in that time.

According to Co-author Guy Palmer “Our analysis points to worrying prospects for those on middle incomes and below. The most pressing policy challenges concern increasing affordability for first-time buyers and ensuring housing is available for those on low incomes.”

At the same time the report points out that there are vast regional differences. The report found that half of all working households in the south of England – which has the highest house prices in the UK – cannot afford to buy property even at the cheapest end of the market.

According to the BBC –

Housing Minister Yvette Cooper told the BBC’s Today programme that the government was working hard to try and alleviate the shortage of affordable housing.

"We are going to be launching, in about two weeks time, a new partnership with some of the mortgage lenders to offer new shared ownership loans for people who want to be able to get into home ownership but cannot afford the whole house price," said.

This shows the classic error of judgment that governments make, basically announcing policies that will ‘patch’ but no ‘cure’ the issues at heart.

The IMF and the OECD have already spelled out the problem to the government. The public in the UK have been encouraged by low interest rates to believe in the housing bubble, so borrowing and pumping ever more into an unsustainable market.

There is only one way to alleviate the market issues and problems at the moment and that is to quickly prick the bubble by raising short-term interest rates. This would precipitate a fall in housing values, but an increase in costs – thus re-aligning a more realistic balance and gearing of debt equity. 

 Sources

Home buyers face growing woes – BBC News

Alarming trends in housing -  JRF