The housing market in the UK is in dire straits and desperately needs reform if consumers are not to be priced out of the market and relegated to often sub-standard, poorly designed and over-priced rented accommodation. The South East sees the worst of it than anywhere else in the UK, leading to potential misery and unproductive, long commutes for many.
A recent report by PwC shows that the cost of a UK home will jump by more than one third nationwide by the end of the decade, with the average house price in London set to hit £500,000 by the end of 2014.
This means that the cost of an average UK home will remain around 10 times larger than the average salary over the next six years. On top of this, we have the growing and justifiable fears of another housing bubble, making everyone question what is this doing to our recovery.
To put it simply, this is not good for the UK economy. Traditionally, the economy has been driven by consumer spending, however consumers are now having to tie up more and more of their money on housing while at the same time increasing their debt levels; and debt was one of the major causes of the Great Recession which started in 2007. In fact, it was arguably more of a debt crisis than a banking crisis!
Government policy has not assisted. It has focused too much on demand side remedies with initiatives such as the Help to Buy scheme. Insufficient attention has been paid to policies designed to increase the number of housing units actually constructed year on year. And the situation now seems to be getting worse with the Bank of England urging lenders to reign in mortgages by applying a hard income-multiple cap for their lending.
The need for the UK to compete on a competitive international economic stage, coupled with the need to retain and accommodate our talented young and mobile workforce within our major conurbations, means that we have to tackle the housing crisis. The provision of flexible, sensibly priced, housing units in our major cities, and that’s not just London, is key to stimulating the type of entrepreneurial interaction within our urban conurbations upon which the whole of the UK depends for its future economic growth.
Housing is now one of the most important asset classes required for stimulating and nurturing economic growth in our cities, and that’s where our future economic growth lies. It’s been ignored for too long and it’s time for the Government to step up to the mark and encourage new models for housing provision, such as the successful private rented sector enjoyed in the USA. Plans to build a few more Garden Cites are insufficient.
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