The UK is in the grips of a housing crisis. There are simply not enough houses being built which means that those houses which are available command a higher price, making them pretty much unaffordable to first time buyers. Despite a raft of initiatives from the government, little in the way of significant change is being made. In a post-Brexit UK, whilst house prices may fall and become a bit more affordable, there is still thousands of people who won’t be able to get on to the property ladder. This means that the buy-to-let market will continue to thrive simply because there is no alternative. Here are some of the hard facts about the size of the housing crisis in the UK.
House building needs to double – The UK population is growing at 1% per year which adds around 270,000 new households per year. Currently we are only building around 140,000 homes per year so therein lies the problem. We need to build 270,000 homes a year just to keep up with the population growth.
The UK has had the fastest house prices – Since the early 1980s house prices in the UK have increased ten-fold. This is six times higher than other OECD and euro area countries.
Bank lending has driven up house prices –UK banks have a legacy of lending high sums of money to people in order to buy houses. None of this money is going into extra house building, it goes to other borrowers who keep the housing merry-go-round circulating.
Falling Home Ownership – Despite the ever-rising levels of debt to buy houses, home ownership is still falling. The property market is dominated by existing home owners with fewer people getting on to the property ladder.
Only 1% of UK land is used for housing – Currently only 1% of UK land is used for housing. Laws related to national parks, green belt areas and areas of outstanding natural beauty restrict the amount of housing that can be built. To improve the housing problem, it has been estimated that we would need to acquire an additional 0.01% of land a year to build on to meet demands – maybe a price worth paying.
For things to change there needs to be radical reforms in how we approach all of the above. In the meantime, the buy-to-let market is the only solution to the housing shortage and that’s why it will continue to grow, despite the UK’s decision to leave the EU.