House price boom to last for a DECADE: George Osborne says demand for homes will continue to outstrip supply for years
02-06-2014
- Chancellor insists planning reforms will deliver more homes over time
- But in 10 years politicians will still be debating soaring house prices
- Insists his Help to Buy scheme is not fuelling a new housing bubble
- Prices in London are up 11.6% in a year and 4.5% in the South East
By Matt Chorley, Mailonline Political Editor
Britain’s chronic shortage of housing which is driving up prices will last for another decade, George Osborne warned today.
The chancellor said despite efforts to build more homes to increase supply, demand will remain a problem until at least 2024.
And he defended his Help to Buy scheme to guarantee billions in new mortgages was fuelling the housing bubble which has seen prices leap by more than 11 per cent in London
Chancellor George Osborne warned demand for homes would significantly outstrip supply for at least another 10 years
Latest figures show that just 107,950 affordable homes were built in 2012-13, less than half the 300,000 some experts think are needed to meet growing demand.
Construction was one of the only sectors to fall in the latest growth figures, including a 3.2 per cent month-on-month drop in private housing.
Today Mr Osborne insisted the coalition's controversial planning shake-up was having a ‘positive’ effect, with more homes expected to be built in the next few years.
But giving evidence to the Lords Economic Affairs Committee he said the problem would take years to solve.
‘I don't pretend this problem is going to be solved in a few months or a couple of years,’ he said.
‘This is a big challenge for our country. We have got to build more homes.’
House prices have risen for almost two years, according to latest figures from the Office for National Statistics
He went on: ‘I imagine if we were to assemble again in 10 years' time we would still be talking about the challenge of making sure that our housing supply keeps up with demand.’
He pointed out that house prices had fallen ‘quite considerably’ during the recession, and were still significantly below their peak.
The Bank of England had also been given powers to cool the market if the Help to Buy scheme appeared to be fuelling a new price bubble, he added.
But the Chancellor conceded that the underlying mismatch between demand for homes and the supply is far from being addressed.
‘I think the planning reforms are clearly working. You see planning applications up, planning approvals up, and the percentage of planning approvals up,’ he said.
‘It is having I think a positive effect on creating new homes and those homes are being built in appropriate places.
‘Across the board, we are pulling a lot of levers. But this is a historic problem.’
House prices in London were up 11.6 per cent in November, 4.5 per cent in the South East and 4.4 per cent in the West Midlands
Liberal Democrat Business Secretary Vince Cable is among those who have voiced reservations about the impact of Help to Buy.
But Mr Osborne said: 'We are recovering from a property crash. Am I someone who says we should be vigilant about this? Absolutely we should be vigilant...
'As is clear from (the Bank of England's) reports, they do not at the moment see what you would describe as a bubble, but they are vigilant.'