Housing Shortage Sends Prices North
08-16-2015
The record shortage of houses may prompt the government to review the planning protection given to the green belt.
The number of houses for sale is at its lowest level since records began in 1978, new data reveals.
The Royal Institute of Chartered Surveyors (RICS) said that the supply side of the market deteriorated in July to a level which meant that there were only 47 properties for sale per surveyor.
Average stock levels have fallen by 20% since the beginning of the year, with East Anglia being particularly badly hit.
RICS said that all areas of the UK are projected to see sizeable house price gains over the next year, with the biggest percentage increase forecast - not surprisingly given the supply constraints - in East Anglia. It also expects strong price growth in Northern Ireland.
These expectations are consistent with those of HSBC who last month increased its 2015 UK house price growth forecast from the 2-5% region to 5-10%.
According to RICS, demand from buyers is rising at the fastest pace since February 2014, the reason for this could be attributed to historically low mortgage rates together with rejuvenated confidence following the instalment of a conservative majority government.
George Osborne's stamp duty reforms which mean that 98% of purchasers now pay less stamp duty may also have bolstered demand.
Separate data from the Council of Mortgage Lenders (CML) this morning seems to support the view that cheap debt is supporting demand for homes.
Their data shows that the repossession rate - already at its lowest since records began - continued to fall in the second quarter of 2015.
According to the CML: "There were 2,500 properties taken into possession in the second quarter, down from 3,000 the previous quarter and 5,400 in the second quarter of last year. Of these, 1,800 were in the owner-occupier market, and 700 in the buy-to-let market."
The repossession rate is likely to creep up when the Bank of England begins to tighten interest rates. Such a move is expected sometime in the first half of 2016.
However, it's important to stress that the popularity of longer term fixed rate mortgages means that a lag is likely to exist between the timing of the first rate rise and the initial 'shock' of the first increase to a home owner's monthly mortgage repayments.
Earlier this week, Sky's Economic Editor, Ed Conway, was keen to stress that the high street banks may begin to raise their rates in advance of the official increase to the Bank of England's base rate.
The rental market is also buoyant with Grainger, the UK's largest listed property owner, this morning announcing that its 100-unit Abbeville rental development in Barking has been oversubscribed by a factor of 10 to 1.
Earlier this summer at a house building conference in London the protection afforded to London's green belt was brought into question.
Rob Perrins, Berkeley Group's managing director said "we have to touch the green belt”, whilst Steve Morgan, the chairman of Redrow homes said: "we need to nibble at the green belt".
Without measures to increase the scale of house building in the capital house prices and rents will continue to rise potentially reaching a level which could hamper London's continued success as major global city.
At the same conference in June, Stephen Stone, the CEO of Crest Nicholson said: "we either need to be allowed to build on the green belt or the government will need to subsidise transport costs for key workers (who would be forced to live in cheaper accommodation miles away from where they worked)".