The National Housing Federation has just published its latest predictions on the UK housing market, and the picture is pretty mixed: it’s expecting prices to keep falling for the next two years, before stabilising in the third year and jumping by as much as 20% between 2012 and 2014. The events of the last couple of years have may have taught us a thing or too about housing booms and over-valued property – but according to the NHF, as long as the supply of new houses fails to keep up with demand, prices are going to have to start going up eventually...
The NHF’s latest research points to a 12.2% drop in prices this year, followed by another 6.8% in 2010, with a return to growth of 1.1% in 2011. There’ll then apparently be a three-year boom, with prices rising 7.5%, 8.4% and 6.8% between 2012 and 2014, pushing the average house price back up to about £228,000. That’s nearly £40,000 higher than the forecast for this year, and would actually take English house prices back above pre-crash heights. Slightly alarming, in light of what happened next.
The problem, according to the NHF, is a simple one: supply and demand. Currently, it says, we’re only building 60% of the new housing we need each year (and since the housebuilders have been hammered by the credit crunch, this has got worse rather than better). Yet affordability isn’t improving, because prospective buyers are finding it so tough to get a mortgage; so lower prices haven’t really reduced demand. In fact, the NHF predicts there could be 5m people on social housing waiting lists by 2010. And given that over a quarter of a million new households are being formed every year, this number is only going in one direction: up.
Even economic dunces like us can understand that if a growing number of buyers are chasing a relatively shrinking number of properties, there’s a good chance that prices are eventually going to start soaring again. Now if you’re one of those unlucky people to be mired in negative equity, having bought right at the top of the market in 2007, this prospect might seem rather appealing – although it sounds like you’ll have to wait until the back end of 2014 before you’re back above water. But given the damage this housing boom – and subsequent boost – has done to the UK economy, we suspect the Government needs to start giving some serious thought to where all this extra social housing is going to come from...
In today's bulletin:
Barclays in bother for making too much money
House prices to jump 20% within five years
A tough lesson from the University of Life
Denise Kingsmill: A slow summer in the city
MT Expert's Ten Top Tips: Boosting business with Twitter