Investment landlords, the overall shortage of housing supply and the numbers now believed to be renting but waiting to buy, all suggest that there would be a fast recovery in the housing market. However, prospects for the recovery look grim.
This is the view of Peter Bolton King, Chief Executive of NFOPP, which encompasses the National Federation of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA).
“The government and the Bank need to take the situation extremely seriously,” he warned.
His comments follow the release of the second part of The Modern UK Housing Market: Origins and Prospects by Michael Ball, Professor of Urban and Property Economics, Department of Real Estate and Planning, University of Reading.
The research, commissioned by NFOPP for the NAEA, concludes that without evidence that lenders are prepared to increase lending, the scale of the housing market downturn is likely to accelerate in 2009 and points out that the crisis affecting the housing market is without precedent.
The report states: ‘There is no knowing how far the market will fall unless something is done about it quickly. The scale of the reduction in mortgage credit is so great that few can buy.
‘More sellers will be forced into the market and increasingly they will need to cut prices. Many will not find buyers because too few in the market to buy will be able to get mortgage finance.’
The report argues that the whole of the housing market needs kick-starting. Emphasis should not be limited to specific slices of it. To this end it puts the need for:
Substantial cuts in interest rates, which would improve affordability and stem repossessions;
- Strong new measures to increase the volume of mortgage lending substantially;
- Temporary government guarantees for the top slice of mortgages both for first-time buyers and others;
- Further, more extensive, temporary action on stamp duty.
Bolton King added: “There is substantial suppressed demand. Renters are holding off from house purchase and investors are waiting for bargains. The long-term prospects of severe housing shortages in the UK mean that with a recovery, prices will recover rapidly as long as financial markets are in good shape.
“Before that, however, the initial optimism that lending would increase following the autumn financial measures appears to have evaporated. Even with substantial falls in interest rates, it is by no means clear that mortgage availability will improve and without that there is no hope of recovery.”
Professor Ball’s report examines the great tenure shift away from renting that characterised every decade of the twentieth century. Now, it concludes, this has probably come to an end. Home ownership cannot expand much more because of affordability issues and the distribution of wealth and income. However, it notes that the proportion of households moving has hardly changed since the 1980.
This leads to the conclusion that the UK has not changed to become a more residentially mobile society. Instead, it appears that, over the past 20 years, a larger share of the more mobile people is being attracted to modern private renting. These people tend to be younger adults.
The Modern UK Housing Market: It’s Origins and Prospects by Professor Michael Ball is in two parts. Part One, published in July covered private rented housing. Both sections can be downloaded from here.
