On the thorny subject of house prices, what we have right now are house prices still rising despite the economic downturn which has followed the Covid 19 pandemic.
Why is this?
The reasons are actually straightforward but the current upward trajectory is not good news for those who need financial help to become home-owners in the future.
For one thing nowadays, many mortgagors (home owners) will still be paying their mortgages off after they have retired and are drawing their pensions!
Research from Savills released earlier, in March 2021, estimates that the UK’s housing stock became worth £7.56 trillion – more than four times the value of the FTSE 100 index on the London Stock Exchange. These are seriously head-turning economic statistics!
What is particularly interesting, are the recent stats which explain that the value of mortgaged owner-occupied homes currently is only about £2.5 trillion, whereas there is £5.0 trillion worth of UK property which is owned completely mortgage-free. In other words this is twice as much as the value of today’s homes being purchased with a mortgage.
This would suggest that the main driver of the present government’s policy, is to continue to encourage capital growth in the housing sector. Such capital value increases obviously favour those who already have substantial property assets however, of course, the converse must therefore be true. These same policies can thus only hinder first-time buyers’ ability to become owners, as their purchasing ability is dependent upon and geared to earnings not capital values.
Polly Neate, the CEO of Shelter, is reported to be saying there is a “desperate shortage” of actually affordable homes for people on low incomes.
It’s simply no good simply putting up with the status quo, or just continuing in exactly the same way as before.
We have to change for the better in these circumstances. We should do this by treating first time buyers just the way we would like to be treated ourselves, even if we ourselves own houses outright. Houses are roofs over peoples’ heads rather than capital assets expected to appreciate in value before all else!
The House Price Solution has come up with the best possible new policy for the whole of the housing sector and for stabilising house prices within it.
In a nutshell the new policy is this:
Firstly, Neighbourhood Development Plans (or NDPs), which are readily available planning tools, should be adopted across the whole country and they ought to include similar purchasing restrictions to those which have more recently been enshrined in the St Ives, Cornwall Area NDP, the H2 policies.
These are to allow local earners a better chance to become local owners and to buy (rather than continue to rent) their principal residences.
As long as there are numbers of local earners who are not becoming mortgagor/owners, these people ought to be considered in preference to those simply having greater wealth and wishing to move to a new location of their choice.
The effect of this policy would be to help retain local communities functionally intact.
The alternative, which we have seen all too much of recently, is allowing whole areas to become ghost towns, owned by richer buyers from further afield. Allowing this destroys local communities of course.
One may easily understand that the present property-owning statistics demonstrate that a new policy is needed if we are to protect local individuality and preserve communities from societal desecration i.e. suffer the same fate that has befallen high streets up and down the country having become clones of one another lacking individuality over time. Specifically, I mean that we should save the character and cohesion of localities, from outside influences such as from those simply hoping to buy into a location just to gain an additional property investment for themselves.
BUT, something more than this is required if we are to stabilise the accelerating rise in house-prices and instead make way for a fairer and more inclusive house-price environment.
What is also required is a much better way to determine house prices themselves and it is this idea which I now put forward, naming it The House Price Solution.
In essence it is all about how to market houses in a way that can balance-out the different offers from competing buyers fairly and more equitably, resulting in a better marketplace for all those wishing to buy their next homes to live in.
It involves changing the way in which houses have traditionally been sold using vendor-led estate agency, to having new buyer-orientated agencies instead. Many of those who are employed in vendor-led estate agency practices currently could fairly easily get re-trained and become registered as buyer-advising agents.
These agents would handle incoming offers in a very different way by acting for and liaising with the different buyers. Sellers would be less able to influence the prices that are achieved because offers would be received directly from the buyers competing with one another, to the relevant buyers’ agents. These offers would be passed to the appropriate vendors by their own buying agents and this would allow house prices themselves to stabilise across the various different regions of the country. The mechanism by which this could happen would be by all offers becoming primarily dependent upon local buyers’ offer-price levels.
Only houses which are exempt from the H2 residence restrictions would be available for purchase by wealthier buyers from the rest of the country, these being outside the scope of these policies.
The above would help by improving the success rate of individual housing transactions themselves, causing a general improvement in the number of house sales able to be made.
In peacetime (i.e. whilst our country is not at war with another), residential planning consents should be delegated to all local town or parish councils for them to determine, depending upon local housing need.
Demand and supply could easily be brought to balance within each individual town and village concerned by introducing an adopting Enhanced Neighbourhood Development Plans (ENDP). See ‘The house price affordability crisis’ on the web site for more information.
This way, genuinely democratic decisions may be arrived at using local decision-makers whom are best able to understand what the current needs of the community are at any particular time.
The different local housing markets could be brought to balance and price levels better able to reflect local demand for housing, more appropriately.
The other necessary change would involve making housing markets operate more efficiently than currently happens, by requiring estate agents to work for buyers rather than being able to work for both buyers and sellers as happens currently.
As a retired residential property valuer I remain convinced that if democratically elected local councillors were to be granted full authority to decide local residential planning applications, the effect of this could resolve the whole housing crisis.
Decisions made by such elected representatives would not be based upon NIMBYism ‘Not In My Back Yard’; quite the contrary!
Instead it would be a question of ‘IN My Back Yard’, as these councillors would be representing the wishes and needs of the local community – not simply trying to resist necessary change!
There could be no finer outcome than this, especially where residential property is concerned, because with this solution these councillors could work to actually resolve the housing crisis which we are now all being affected by, particularly owing to its increasing severity.
As explained, the goal of preserving local communities by providing sufficient and affordable homes up and down the country, whilst still allowing a smaller number of the wealthier buyers to integrate, could be achieved. Better price stability within all UK housing markets also would be the clear result.
This site proposes changes to the whole way in which houses are marketed as well as bringing in more effective planning controls.
The house price affordability crisis
“Solving the affordability crisis”
Posted by: Peter Hendry, Consulting Valuation Surveyor
Author of:– The House Price Solution
Your comments on this subject would be appreciated.
Please also note. Unless things change significantly along the lines explained here, countless people will experience considerable financial trauma, so please sign our petition.
The link below opens this is in a new tab.
The cost-effective way to stabilise housing affordability across the whole of Britain
Footnote:
Doing this would help bring about these much needed changes.
Further reading and resource links:
Savills:
https://www.twindig.com/market-views/houselungo-210321#slice
Shelter’s impact and activities: