Originally written as a column for insidehousing.co.uk
News that house prices are rising at their fastest rate since 2004 highlights both the perverse effects of the pandemic and long-term problems with affordability.
Average prices across the UK rose by 13.2 per cent in the year to June according to the official UK House Price Index with Wales and the North of England leading the way.
While a low level of transactions suggests a need for some caution in interpretation, the same pattern has emerged in other house price surveys of double digit inflation led by regions outside London and the South East.
That confounds expectations at the start of the pandemic of recession about a declining market. The stamp duty holiday announced last Summer looks like an expensive mistake that has just helped fuel house price inflation.
In normal circumstances a bust might well follow the boom but continued support for the market will come from the estimated £180 billion in savings that households have built up during the pandemic and the wealth gap between housing haves and have-nots seems set to widen still further.
There is evidence of the same pattern emerging in housing markets around the world: annual house price growth across the 38 richest nations has more than doubled during the pandemic to hit 9.4 per cent, according to the OECD.Read the rest of this entry »
Originally published on April 20 on www.insidehousing.co.uk.
The housing market is at a frenzied record high as house prices rise by more than 2 per cent in a single month.
Just the moment then for the government to step in with a scheme to guarantee 95 per cent mortgages for anyone who thinks they have to climb the ladder before it disappears out of reach.
The house prices in question are only asking prices as recorded by Rightmove but the £6,733 average increase between March and April reflects a rush to beat the end of the stamp duty holiday and demand for more space from people who have done well during the pandemic.
It’s now 13 months since the start of the pandemic and, to pick another measure, house prices are up by around £16,000 or more than 7 per cent since then, according to the Nationwide.
Prices initially fell amid the economic uncertainty but surged again on the back of the stamp duty holiday introduced by chancellor Rishi Sunak last July and then extended in March.
The overwhelming beneficiaries are people who already own homes who have been able to sell them for higher prices that now wipe out the stamp duty savings for most buyers. For all the rhetoric about helping people on to the housing ladder, few first-time buyers saved much in stamp duty and all now face having to spend considerably more in total.
The mortgage guarantee scheme, essentially a rehash of one part of Help to Buy, should help them by addressing a genuine problem with the supply of high loan-to-value mortgages.
However, lenders are cautious. The Financial Times reported on Saturday that the largest banks are refusing to lend on new builds under the scheme and that they may also charge higher rates and apply stricter affordability criteria.
From their point of view that makes sense to guard against falling prices, especially when they factor in the new-build premium that adds around 10 per cent to the cost of a new home. .
And the benefits look dubious for first-time buyers too. Based on the Nationwide index, a 95 per cent loan on home at the current average price would be £220,000 – more than the total price was when the stamp duty holiday was first announced.
None of this makes any sense and yet, in an under-supplied and under-taxed housing market fuelled by credit and low interest rates, somehow it does.
As memories fade of the housing market crash of the early 1990s and the downturn after the financial crisis, the logical next step would be a relaxation in affordability checks on mortgages to allow loans at larger income multiples, ignoring the lessons of the 2000s and the economic headwinds that could lie ahead as furlough ends.
But all of this is happening at the same time as the entire market for recently built flats remains mired in the continuing fall-out from the fire safety crisis.
Inside Housing reported on Friday on cases of leaseholders buying flats on the basis of External Wall System (EWS) form declaring that their cladding was safe only for new inspections to decide that it must be removed.
One buyer purchased a £350,000 flat rated A1 and safe in February only for the EWS to be downgraded to B2 just 34 days later. That made her flat worthless and left her facing costs for waking watch and cladding remediation.
If the EWS rating can be changed at the drop of a hat like this, why would anyone risk buying a recently built flat?
The government has grudgingly and in stages committed a total of £5.1 billion to fixing the cladding crisis so far and it has announced some welcome reforms to leasehold.
But leaseholders in buildings below 18m are only eligible for loans and help does not apply to other fire safety problems, leaving a significant chunk of the housing market in limbo.
The fact that at the same time the government has spent £5.4 billion on the stamp duty holiday says it all about where its priorities really lie.
Originally published as a column for Inside Housing on November 12.
When the pandemic is eventually over, one of the big political questions will be how the government will go about recouping the huge sums pumped into keeping the economy going.
Chancellor Rishi Sunak told the Conservative conference that he believes it is his ‘sacred duty’ to balance the books. Even before the costs of the second wave, a document leaked from the Treasury in May suggested that tax rises or spending cuts equivalent to £25-£30 billion would be needed.
However, Mr Sunak is boxed in by manifesto promises not to increase income tax, VAT and national insurance and not to scrap the triple lock on pensions.
Cutting public spending will not be easy either. If anything the pressure will be the other way as the government looks to implement its levelling up agenda.
That applies even to the depressingly familiar remedy of cutting benefits, with calls for temporary increases in universal credit and local housing allowance to be made permanent set to grow as unemployment rises.
However, housing could still be a key battleground when it comes to tax and areas not covered by those manifesto promises. So far, it’s been another cost to the Treasury, with the £3.8 billon earmarked for the stamp duty holiday, but sooner or later attention will turn to the other side of the ledger.Read the rest of this entry »
Originally published as a column for Inside Housing on July 8.
This was a Summer Statement that was all about protecting jobs and getting money into the economy as quickly as possible.
Judged in those terms, while it does not go as far as some had advocated, the two big housing measures in chancellor Rishi Sunak’s Plan for Jobs look carefully calibrated to achieve both.
The £3.8 billion cut in stamp duty (increasing the nil rate from £125,000 to £500,000) is calculated to boost transactions, generate jobs and drive additional spending estimated at around 5 per cent of the house value.
And the Treasury reckons that the £2 billion Green Homes Grant (funding two thirds of the cost of energy efficiency work up to £5,000 for owners and landlords and all of the cost up to £10,000 to low income owners) could support over 100,000 green jobs as well as cutting carbon emissions and fuel bills.
But it’s not hard to find holes in the Summer Statement where other housing responses could and should have been: the statement does nothing more for affordable housing, it fails to fill holes in the safety net and, as Generation Rent points out, vouchers to eat out are not much use if you cannot afford to stay in.
And though the two measures that are there should boost the economy in the short term the longer-term benefits of both look uncertain at best even when you judge them in isolation and in their own terms.
Originally posted on insidehousing.co.uk on April 23.
An extension of Help to Buy looks likely, a stamp duty holiday probable, but what else should the government do when the housing market eventually emerges from its Coronavirus freeze?
Vested interests are already out in force making their case and can cite the effect of a downturn on housebuilding numbers, the economy and tax receipts in their support.
And if anyone is feeling a sense of déjà vu this is of course pretty much where we were in 2008, when the housing market slumped in the wake of the credit crunch.
Originally published on August 20 on my blog for Inside Housing.
A stamp duty plan that apparently never was offers a tantalising preview of a Budget and spending review that will take place in neverland.
Saturday’s Times reported that sellers rather than buyers would pay stamp duty under plans for a tax shake-up by chancellor Sajid Javid.
The plan seemed either fraught with problems (sales would dry up as buyers waited for the change to take effect) or pretty meaningless (sellers would simply add the extra cost to their asking price).
And the story seemed built on flimsy foundations and journalistic hype – in the interview itself Javid was asked if he was considering the change and did not deny it but that escalated into a definite change in the headline – but presumably there was off-the-record corroboration too.
By Sunday the man himself was taking to Twitter to deny that he was planning anything of the sort:
Clearly this government is not quite the messaging machine with iron discipline that we’ve been led to believe and is just as prone to getting its wires crossed as any of its predecessors.
But what does this episode tell us about what’s to come for housing in the Budget – there is no confirmation yet whether that will be before or after the ‘do or die’ Brexit date on October 31 and there could even be one before and one after – and the spending review to follow next year?
I’d never heard of Ken Griffin before a week in which the hedge fund billionaire bought the most expensive home ever sold in the United States and then snapped up (as you do) what is thought to be the priciest home sold in Britain for a decade.
I use the words ‘houses’ and ‘home’ in a loose sense, of course. Because we are talking about penthouses, apartments and condos too. And because, despite spending $238m on a four-storey penthouse in a new skyscraper in New York and £95m on a London house near Buckingham Palace, it’s hard to see how he will spend much time living in either of them.
Griffin’s Citadel hedge fund is actually based in Chicago, where he already has two more homes. The most expensive ever sold in the city, a $59m four-storey penthouse, offers a place to crash after day at the office. Fitting it out could cost another $25m but if he needs somewhere in the meantime he also owns a whole floor of the Waldorf Astoria plus a two-storey penthouse in another skyscraper.
For weekends or holidays he can fly down to Florida, the state where he was born and has acquired a $230m portfolio of land and property in Palm Beach near President Trump’s Mar-a-Lago estate. One property (which cost $15m) will apparently be used as a guest house while some of the four others could be demolished to make way for a gargantuan beach house. That’s almost forgetting the $60m penthouse in Miami that he seemingly never moved into and has now put back on the market.
If he fancies a change of scene, he can nip over to Hawaii, where he bought one property for $11m in 2009 only to buy a second for $17m three years later.
I’m labouring the point here but it’s worth it on a few different levels, most obviously for what it reveals about the astonishing lives of the ultra-rich but also for what this extreme case says about our attitudes to housing and property and about what has happened since the financial crisis.Read the rest of this entry »
Originally published on April 17 on my blog for Inside Housing.
Dominic Raab’s comments about immigration and house prices may have sparked a furore but they also shine a light on something else about the recent history of housing.
Amid mounting pressure, on Friday the Ministry for Housing and Communities Local Government (MHCLG) published updated analysis that he had relied on for his claim that he had been told by civil servants that immigration has increased house prices by 20 per cent over the last 25 years.
When I tweeted about it, the man himself came back to me with this:
In fairness, he could have added that the increase was actually 21 per cent but, as I suggested last week, that is minor by comparison with the 284 per cent total rise in prices that happened between 1991 and 2016 and accounts for just £11,000 of the £152,000 increase.
According to the analysis, increases in real earnings were a much more important factor in price rises.
Look a little deeper, though, and the analysis does not really prove very much either way.
Originally published on April 9 on my blog for Inside Housing.
The latest Mr Buggins to take his turn in the housing minister job gave a revealing first print interview on Sunday that speaks volumes about his priorities.
The new(ish) minister – I forget his name, they come and go so quickly – makes the seemingly incendiary claim that immigration has pushed up house prices by 20 per cent over the last 25 years.
He tells the Sunday Times that he is writing to the Migration Advisory Committee (MAC) to urge it to consider the negative effects of immigration on housing demand as well as its positive economic benefits.
Mr Buggins is playing a key role in the drive to boost housebuilding but he says: ‘You’ve got to deal with demand as well as supply. You can’t have housing taken out of the debate around immigration. If we delivered on the government’s target of reducing immigration to the tens of thousands every year, that would have a material impact on the number of homes we need to build every year.’
He says he’s been told by civil servants that immigration has had a sizeable impact on prices based on the Office for National Statistics house price index from 1991 to 2016.