Partner Article
New homes are still dominating the economy
In my last column ‘New homes are a key element to economic growth’, I addressed what needs to be done to deliver the much-needed 230,000 homes each year until 2030.
Last week Chancellor George Osborne and Governor of the Bank of England Mark Carney each gave a speech to the Mansion House in which a key concern was the housing market.
The Chancellor acknowledged that housing is a long-term problem. While his economic plan seeks to provide a solution, there is a risk to economic stability in which too much is borrowed to pay for rising house prices.
Osborne stated that house prices today are still lower in real terms than in 2007 and forecast they will stay below that peak for some years to come. He sought to calm the market by expressing that there was no cause for alarm but acknowledged that there would be if London’s rate of growth remains too fast for comfort.
The Chancellor explained that the average loan to value was well below normal but that the loan to income ratio had risen to a new high. This was no immediate threat to the financial stability to the housing market but could be in the future. He concluded that he was acting now before a problem materialises.
So new powers have been given to the Bank of England to limit ‘loan to income and value size’, thus if a housing bubble develops the Bank can act independently of politics.
The market reacted by claiming that these were blunt tools and mortgage restrictions could kill off the burgeoning housing market recovery that has started to take hold outside of London.
Governor Mark Carney continued to get the markets used to the likelihood of small, incremental interest rate rises – again a very blunt tool. As Jeremy Blackburn, Head of Policy at RICS, said, for many families even a small increase in the interest rate would see them struggle with mortgage payments.
In an effort to encourage more housing to be built, but not reported in the press beyond the headline of interest rates and growth rates, the Chancellor also announced that councils would be required to put local development orders in place on over 90% of brownfield sites that are suitable for housing.
They will be able to specify the type of houses to be built but not whether there is housing. This aims to create 200,000 new houses with planning permission, saving green field space at the same time. A fund of £½ billion will be provided to make this work.
The RICS responded that land must not just be available but economically viable for development and most importantly there needs to be suitable demand for housing not simply need. The local planning authorities also need time to submit local plans and define a five-year land supply for housing.
These matters are currently the subject of a public inquiry for the Newcastle and Gateshead Core Strategy – and they are complex. Consideration is given to population rise or fall, the available supply of land, there is argument over how much green field land is required and over other factors that will be impacted by new housing, such as roads and other infrastructure.
It is clearly a complicated challenge but in our region new housing supply is needed and quickly. We must gear up to early delivery and find ways of achieving success to help accelerate our economic growth.
This was posted in Bdaily's Members' News section by JK Property Consultants .
Enjoy the read? Get Bdaily delivered.
Sign up to receive our daily bulletin, sent to your inbox, for free.