Anyone working in the property market should have at least one eye on supply. Of course, it’s a constant issue for estate agents but also all other stakeholders – whether lenders, conveyancers, advisers, or surveyors – have just as much ‘skin in the game’ when it comes to wanting and needing a healthy supply of property on the market and readily available to buy/rent.
It is of course an ongoing balancing act but, I think it’s fair to say, that we have seen a large number of demand drivers and demand enablers – with more likely to come – but I’m not so confident we have reached anywhere near the same level of action when it comes to trying to drive up supply.
This is not something that should be laid squarely at the door of this Government, by the way. For as long as I can remember, through various Government iterations over the last 40-plus years, the ability to get the supply the UK housing market needs has been a struggle.
It is widely thought that we need at least 250,000 newly built properties every year in order to stand still and it won’t need me to tell you that this has not been achieved for a very long time. In fact, Government statistics tell us that you would need to go back to the late 1970s to get over 250k, and the last time over 200k dwellings was built was in the late 1980s.
So, to have a Government target set of over 300k new homes to be built every year by the mid-2020s was always going to be an ambitious one, and just recently it would appear that Michael Gove, at least, doesn’t appear to believe it is realistic. While the Government has not rowed back officially on this figure, Gove called the target ‘arbitrary’ and if we consider that the UK’s last 12-month figure was 171,630, then you can see the significant increase that is going to be required in a short space of time.
Which makes the supply we currently have all the more precious, not just in terms of new developments, but clearly in terms of existing housing stock across all manner of sectors. It is, after all, not just stock for owner-occupiers that is currently low, but also in the private rental sector and in social housing which has tended not to be a priority.
The recent speech by the Prime Minister, Boris Johnson, also appeared to have the potential to reduce the social housing stock even further, and in turn could put more pressure on the PRS, at a time when many tenants are seeing rents rise due to a lack of supply.
The proposal to extend the Right to Buy to housing association tenants, mirroring the scheme from the 1980s which was available to council house inhabitants, is somewhat understandable from a party-political point of view, but I have to wonder whether it has been truly thought through and, as mentioned above, what the impact might be in terms not just of overall social housing supply, but the knock-on impact.
Right to Buy – a key policy of Margaret Thatcher’s Premiership – has long been deemed one of the ‘crown jewels of the Conservative Party and it certainly helped a large number of people onto the housing ladder for the very first time. But one of the key concerns back then – and therefore now – was whether there was an adequate replacement of those homes which were bought up.
Many believe there wasn’t, and that supply was eroded significantly as a result. With this new Right to Buy measure, the Government says it has received cast-iron guarantees that for every housing association property sold, a new one will be built so there is a like-for-like replacement. Again, there will be many sceptical about whether such guarantees can be given, and what ‘like-for-like’ really means? Could, for example, a three-bedroom house be replaced by a studio/one-bed apartment? We would hope not.
At a time when the UK requires all the housing stock it can, there is a danger here that we ramp up demand, lose further housing association supply, which sends more people into the PRS, which inflates rents, and moves more people further away from being able to buy a property. This is somewhat hypothetical but we all know how inter-linked our property market is, and pressure in one area often leads to further build-ups elsewhere.
Propertymark’s latest research shows there were, on average, 22 properties for sale per member branch in May. That has not changed in the past three months but the pre-pandemic average of the same month between 2010 and 2019 was 50. That’s a significant drop, and with demand incredibly strong still, you can see why house prices have moved significantly in the direction they have.
Currently, our market is something of a delicate eco-system, but one thing is certain, we need a strong supply of properties for purchase (and rental) in order to keep it moving. Demand is there and we would argue does not need any further boosts – it is time to concentrate on levelling the playing field by helping improve supply across all aspects of the market.
*Beth Rudolf is Director of Delivery at the Conveyancing Association
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Nearly all property policy in the last 15 years has been ad hoc electioneering or perceived quick fixes, Eg, Stamp Duty increases, Section 24, the Tenant Fees Act, planning reform, the new Right to Buy scheme, the Renters Reform Bill, MEES, etc, all of which have simply reduced supply and increased costs to everyone involved, and solved very little.
There needs to be a housing minister that actually understands the various property markets for a start and how they interconnect, get how stakeholders behave and will behave when things change, who then conducts a proper strategic overview of all property policy and taxation to ask how can our aims actually be achieved without creating unitended pressures in other areas. ie: more supply, but that is also accessible, its no good if the majority cant afford to rent or buy what is created.
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