When the recession hit, it wiped out livelihoods and decimated entire markets. In the face of a global slump, Britain’s housing sector was no exception; buyers couldn’t afford to buy and builders couldn’t afford to build. Over the course of several years, the pace of the property market dropped from jet stream to tumbleweed and the UK was left with an increasingly problematic housing deficit.
Perhaps if we’d entered the downturn with a supply / demand ratio that was more or less in balance, this wouldn’t have presented such an urgent issue. Of course, this wasn’t the case. In 2007 the Government set a target of increasing the supply of housing to 240,000 additional homes per year by 2016, recognising that the rate of population growth was already far outstripping the number of available homes. This was before the double-dip recession, during which building rates stooped to the lowest levels they’ve been during peacetime in the last century. Starting from this less than favourable position, the goal has been missed year on year, exacerbated by timidity on both sides of the equation to get the market moving again.
Of course, it pays to remember what caused the global financial crisis in the first place: mismanagement of housing, getting arrogant about the limits of mortgage lending and stretching incomes way beyond their means. When the severely overloaded sector came springing back in on itself, buyer confidence plummeted alongside the willingness of mortgage providers to lend at all. The subsequent lack of new housing supply and surfeit of demand have bumped the cost of property up and up again, effectively pricing an entire generation out of the market; eight out of ten first-time buyers are only able to get on the ladder with financial help from their families/friends thanks to the average cost of a first home almost doubling in the last ten years according to the ONS House Price Index.
Thankfully, there are now signs of life; house builders, sellers, and buyers alike are starting to take those first few tentative steps towards reinvigorating a tired sector and bolstering the recovery of the wider economy. The UK’s first time buyers are breathing a collective sigh of relief as supply starts to catch up with demand, causing the rocketing house prices of late to begin to slack off; the last six months have seen the highest number of first time buyers entering the market since the same period in 2007. There is serious work to be done, however, as the failure to meet housing demand over an extended period has left a formidable backlog to accumulate across the country.
Housing is at the very centre of our society, and has the capacity to create communities or, equally, destroy them. Until we reach an equilibrium in which the amount of housing required maps onto the amount of housing built, the problem won’t go away and these boom-bust property cycles will continue. It all boils down to the very basic principle of supply and demand. With enough sustainable, high quality affordable housing, people can get onto the market and live their lives without having to rely on older generations for financial support. With intelligent design and better quality of land being made available for development, we can avoid the disenfranchisement of families forced to live in areas sandwiched in between busy roads and roundabouts. With policies laid out on a generational basis rather than rehashed every time the electoral cycle swings back around, we can create some certainty and stability in this particularly fragile market.