Our Housing Minister looked at the demand side of the equation yesterday:
In his first speech since being elected Shapps told a gathering of housing sector experts that "the age of aspiration is back.. I don't agree with my predecessors that reducing homeownership might be a good thing," he said. "Most people still want to own their own homes and I want people to know that this government will support them in that."
And further:
Shapps says that 1.4 million people want to buy their own home: "The age of aspiration is back. Another quarter of a million people can afford a mortgage of at least 80% loan-to-valuation, but can't find a lender. The banks and building societies will be asked to come and see me to explain why that is and what they plan on doing about it."
Our Communities Secretary ruled out one possible source of new supply last week:
"The previous Government gave a green light for the destruction of the Green Belt across the country and we are determined to stop it," Mr Pickles said, "We've promised to use legislation to scrap top-down building targets that are eating up the Green Belt, but I'm not going to make communities wait any longer to start making decisions for themselves."
Our Decentralisation Minister* ruled out another possible source of new supply today:
New measures will be announced today to stop the practice of "garden grabbing". Decentralisation minister Greg Clark is giving local councils immediate powers to prevent the building of new homes in back gardens... Local councils have struggled to stop the trend as gardens have been classified as "previously residential land", meaning they are brownfield sites.
The third and final option would be to somehow encourage/force** landlords and second home-owners to sell their properties to 'aspiring buyers', of course, but I think certain Tory back-benchers will have a thing or two to say about that.
* A job title which somehow reminds me of when the previous government set a target for the reduction of targets.
** Delete according to whether you think that market forces are A Good Thing or A Bad Thing.
Wednesday, 9 June 2010
Supply and demand
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13 comments:
"the age of aspiration is back."
but a rise in interest rates would bring it to a speedy and well-deserved end.
BTW, in the 18 year house-price boom and bust cycle, do interest rates always fall in line with house price rises?
I don't care if you want to class them as brownfield or bluefield sites. Unless there's a good reason, people should be allowed to build on their gardens.
When it's 1 in 4 houses, it's a catastrophic decision.
Joseph - the good reason is that building in your back garden adversely affects neighbouring properties.
What if you had a nice view which was replaced by a brick wall?
What if your previously private bedroom suddenly had windows looking in on it?
What if you lost all privacy in your back garden?
Planning permission is there for a reason.
B, although it is broadly true that house prices are the inverse of interest rates, it is only one of many factors. We discussed this once at length over at HousepriceCrash and there is no discernible correlation, principally because it is real interest rates that matter and not nominal interest rates.
JT, is it really one-in-four?
Anon, OK, what's it to be:
1. More efficient use of existing housing, i.e. pensioners downsize, second homes sold to owner-occupiers etc.
2. Build on greenfield with nice big gardens.
3. Higher densities in towns and suburbs.
4. Tell the young to get stuffed, as you were there first?
"3. Higher densities in towns ..." gets my vote. Towns work a lot better when more people live in their centres and not just in housing estates round them. Unfortunately the British prejudice is that high density = low quality, whereas you only have to look across the channel to see that this is not so.
Please explain the difference between real and nominal interest rates.
B, I'm a land value taxer and a libertarian. Some people want to live in a suburb with big gardens (in fact I do, come to think of it). As long as those people are prepared to shell out lots of LVT for the privilege (and I am), then everybody's happy. No need for planning laws or targets, it sorts itself out.
Nominal interest rate = the rate used to calculate the interest payments (i.e. the headline rate).
Real interest rate = nominal rate adjusted down for inflation. Nominal interest rates are normally about 2% higher than inflation.
i.e. if inflation is 2% and nominal mortgage interest rate is 5%, that's a high real rate of about 3%. House prices would be stable.
If inflation is 10% and nominal mortgage interest rate is 8%, that's a negative real interest rate of 2%. House prices would go up under such circumstances.
Anonymous,
Joseph - the good reason is that building in your back garden adversely affects neighbouring properties.
If it actually affects the property, light, access and so forth, I would not want that. That's the basics of good planning - not building something that adversely affects someone.
What if you had a nice view which was replaced by a brick wall?
I won't. I quite deliberately bought in a developed area.
What if your previously private bedroom suddenly had windows looking in on it?
There are certain rules about planning which are about basic rights of homeowners like light, privacy and access. They're the basics of planning which are actually good. And Labour giving permission to build on gardens was within them. That stuff hasn't changed.
What if you lost all privacy in your back garden?
Again, this is basically dealt with by the standard planning stuff, which is not what is going on here.
Planning permission is there for a reason.
I quite agree. There's very good reasons that we don't just allow people to build skyscrapers next to a house in terms of light, access, water, privacy and so forth.
And all the houses that Labour allowed to be built would have complied with those regulations.
What this is about is people wanting the right to a nice view because they feel they're entitled to it because when they bought a house, it came with a nice view.
Mark: From the BBC (http://news.bbc.co.uk/1/hi/uk_politics/8728633.stm)
"Recent government figures suggest the proportion of houses built on previously residential land, such as gardens, increased from one in 10 in 1997 to one in four in 2008."
It's not like Labour were exactly tarmacking the countryside, but this is going to be catastrophic.
Can anyone suggest somewhere for my kids to emigrate to?
"If inflation is 10% and nominal mortgage interest rate is 8%, that's a negative real interest rate of 2%. House prices would go up under such circumstances."
But what would the real value of the houses be doing, i.e once you allow for the inflationary devaluation of the currency?
"Recent government figures suggest the proportion of houses built on previously residential land, such as gardens, increased from one in 10 in 1997 to one in four in 2008."
That would, however, include all those scams where public money was used to "encourage" developers to buy up and pull down Victorian and Edwardian terraces and replace them by blocks of flats. So you have no idea how many of these new houses actually were built on gardens, nor how many of those "gardens" were weed patches behind residential-converted-to-commercial properties in town centres.
JT, well parried, sir! As suspected, the Tories are even more Home-Owner-Ist than the last lot.
B, its the 18 year cycles that matter. There is of course some correlation between interest rates and house prices, but that's very much an 'all things being equal' type statement. For example, low real interest rates means 'economy doing badly' and vice versa; and in inflationary times, although nominal interest rates are high, people see houses as a good hedge against inflation.
bayard,
If you're referring to Pathfinder, that was done up north and most of the "garden grabbing" is down south. I'm not sure about the weed patches. Any way to work these things out?
JT, "Pathfinder" (wasn't that some sort of bombing operation in the war?) may well have been in the north, but, unless your statistics are for the south only, they should still include its results. Sorry, I don't know how you find out about the weed patches, but I'd instinctively distrust any news story based on statistics, as it's always in the journalist's interest to make things sound as good (or bad) as possible. ("Dog bites man" is, famously, not a headline, but "Over 75% rise in hospital admissions due to dog-bites" is.)
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