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Housing deficit reaches crisis point

The latest figures released by The Yorkshire Building Society have shown an alarming increase in the housing deficit in the UK.

Housing deficit reaches crisis point

In truth there has been a growing problem with the housing deficit since the 1980’s when Margaret Thatcher introduced the ‘right-to-buy’ scheme which allowed council tenants to buy their social housing from the local authority. This meant that available stock for young, poor and low income families started to contract over the years, causing a strain on available cheaper housing stock for first time buyers.

In time, the decreasing stocks meant a supply and demand deficit that gradually started to drive the prices of formerly cheaper houses up. Around the time of the leadership of Tony Blair post-1997 these factors conspired together to form a ‘perfect storm’ and house valuations and prices shot through the roof. Over an extremely short period of time people were becoming quite wealthy simply by being owners of bricks and mortar.

This eventually led to people buying homes for fast profit rather than as somewhere to live and houses were being bought and re-sold sometimes for as much as £50,000 profit over the space of six to twelve months. This in turn caused all relative parity in prices and incomes to evaporate and we currently sit in a situation where first time buyers are looking at average asking prices as much as ten times their annual salary. Post-2008 financial crash the criteria for mortgage lending has been tightened beyond all recognition from before the economic meltdown and people looking to gain access to the property ladder are now stuck in no-man’s land.

To cement these struggles since 2004, the housing deficit in England has grown to 1,199,180.

In 2015, the government set the UK house building target by pledging to build one million homes over its five year term. However, 142,890 homes were built in 2015 as a whole, 29% less than the 200,000 which would need to be built per year to reach the target of one million new homes by 2020. Prior to this, the Barker Review of Housing Supply highlighted that England alone would need to increase its current level of house building by 145,000 in order to reduce annual house price inflation to 1.1%. This figure was based on there being 125,000 completions in 2002-03, meaning that the recommended number of homes needed per year to reduce house price growth to 1.1% was 270,000.

The figures then show that the government’s target of building 200,000 homes per year is at least 70,000 properties a year short of what the country needs. Yorkshire Building Society added that as the recommended level of house building has never been reached in the years since the Barker Review was published in 2004, and the recommendations in the Review only relate to England alone, the number of properties needed in the UK each year to reduce house price inflation to 1.1% is now likely to be “significantly higher than the 270,000 figure”.

These issues have led to a house price slowdown in London amid some experts stating it as evidence of a bubble in the capital. The picture seems relatively better in the Northern regions of the country where prices have risen at fairly stable rates and in much closer alignment to incomes and cost of living.

Investors and property experts appear to be mirroring this statement as investment and yields in the north and the Northern Powerhouse regions in particular grew stronger even through the turbulent economic times of the last 6 months with Manchester able to provide typical yields of 5% rental yield and 7% capital appreciation. Demand for rental accommodation is strong in the North and, by comparison with other regions, housing is cheaper. In comparison yields in London and the South-East are much lower – around an average of 4.86% in outer London and 4.71% in the City according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.

All these factors together are showing that the Northern regions of the UK are providing a much more natural home for first-time-buyers and investors alike. Those looking to get on the property ladder are much likelier to find a property that meets their price range and investors and landlords are seeing the benefit of this through strong yields.


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