Wow! What a response to my questions on housing. As a good number of you say, it is a crucial issue for many. There are two nations, the haves and the have nots, when it comes to home ownership.
As many of you also rightly say, homes are very expensive for people starting out on average or below average salaries. Now the banks require a much larger deposit it is doubly difficult.
That produces a paradox. If the government follows policies to cut house prices more and more quickly, that entails rationing mortgage credit even more strictly That makes it in the short term even more difficult for people to buy their first home. If the government relaxes mortgage credit too much more people can start out, but the homes absorb an ever bigger proportion of people’s incomes. Ultimately it is self defeating. The main driver of high house prices in the period from 2002 to 2007 was excess credit flowing from weak regulation of the banks and the low interest rate environment. That leaves first time buyers today in great difficulty.
We need to work towards a better relationship between average income and home prices, without a violent shake out which will damage existing owners too much and will put off or prevent first time buyers from starting out on ownership. Ideal would be a period of no rises in house prices coupled with a resumption of real income growth, leading to a better balance over a few years. That is easier said than achieved.
One of the main drivers of high or sustained house prices in the last eighteen months has been the big fall in the pound. This has meant that central London property prices which are very high for any normal tax paying UK earner have become a lot cheaper for overseas buyers buying from a stronger currency base. This in turn has enabled more UK central London residents to sell at good prices and then pay higher prices than otherwise for alternative property elsewhere in the UK. The continued strong flow of migrants into the UK has also created a strong demand for housing of all kinds, against a background of relatively low build rates.
So, to get prices and incomes into better balance we need a number of measures, each inadequate in itself but together helping to move the balance:
1. Lower Stamp duty tax on purchases
2. Aboliton of Seller’s packs, which act as a deterrent to putting your home on the market
3. Deficit reduction and monetary policies designed to stop further falls in the pound
4. Re balancing of the credit available to private and public sectors through the banks – credit for mortgages has lurched from being far too easy to being too tight
5. Incentives for local homeowners and their Councils to accept new development – compensation for affected neighrbours, developer contributions for infrastructure and extra Council tax receipts for Councils
6. A Simplified planning system capable of giving quicker answers – whether Yes or No – without the cumbersome regional level interfering. Local people need to feel more in control of whether and where new development should go.
7. Proper controls on borders and migration rates.