What Does the Future Hold for the UK Housing Market?
The current UK housing boom is an endless source of stories and speculation. With house prices are at record highs, some commentators forecast a further price rise of 35% by 2020. Meanwhile, others are echoing the Bank of England’s warnings of a potential market crash. So what’s the future hold for the UK housing market? Let’s read it out
Demand Will Continue to Outstrip Supply
Owning a home is the ideal for a vast majority, but there are simply not enough houses on the market. Residential demand is dictated by area demographics and socio-economic factors, and unless more houses come on the market, increasing property prices will see traditional home-buyers renting for life.
Increased Reliance on Social Housing
As house prices rise on the back of the supply and demand imbalance, Registered Providers will see associated demand for affordable social housing. There will also be an increase in cross subsidy schemes. In theory, private builders, Housing Associations, and the public all benefit from these schemes, although they only work if profit from a private sale is sufficient to fund Housing Association properties.
Increased Reliance on the Help to Buy (H2B) Initiative
During the recent market correction, it was expected that more first home buyers would get a foot in the door. While this didn’t happen, the government’s help-to-buy initiative has allowed more people to enter the housing market. If house prices continue to increase, there will be more people seeking help through this initiative. However, there is concern the H2B scheme could produce further pricing bubbles.
More Public Land Allocated for Housing
The government has identified enough surplus public sector land for 100,000 new homes. The New Homes Bonus has also been introduced for Local Councils. While scale and timing are being questioned, this initiative will assist in getting more homes on the market.
Relaxed Planning Policy Regulations Will Stimulate Building
The government’s recent housing standard review has streamlined regulations and codes, removing much of the unnecessary cost and complexity formerly associated with building a new house. If relaxed regulations work as intended, they will help address the housing shortage.
The Market Will Remain Skewed Toward London and the South East
The housing market has always been polarised toward London and the South East, and demand in these areas continues to grow. As long as focus remains on meeting housing supply shortages in London and the South East, similar shortages in other parts of UK could remain under-addressed.
Welfare Reform Changes Will Affect Social Housing
On the surface, the Housing Benefit reforms are logical for freeing up under-utilised social housing. However, Housing Associations have reported that increased time spent focussing on existing properties and community support has restricted their ability to invest and focus on new housing.
These points are only a snapshot of the future of the UK housing market. However, it’s evident that social housing policies, demographic changes, housing shortages, and the wider economy make the housing market more volatile than ever before. The only certainty is that nothing is certain.
As said by Eden Harper– a real estate agent “interest rates could be rising, and that somehow this is going to stop the seemingly never-ending increase in house prices”.
