Why house prices raise concern

Why house prices raise concern

Are house prices bound to rise as fiercely as some predictions suggest? You could understand the gloom among first-time buyers if some of the forecasts are even remotely accurate… BQ's Brian Nicholls interviews Jeff Alexander, a leading building executive in the North East.
  • Prices could rise by 25% in the next five years, says RICS
  • A shortage of a million homes within a decade, says agent Savills
  • It will be unaffordable to exist in parts of Britain if another house price surge comes: JLL Property Group

Is the situation quite so bad? Jeff Alexander, recently elected president of the Northern Counties Builders Federation and a director of Surgo Construction in Newcastle, tells BQ: “I think it’s probably not as bad as that, but there is a concern. Affordable housing generally speaking is a problem. I think a lot of public providers of housing are doing the best they can with their resources.

“But I still think there is a general shortage of suitable land and planning difficulties exist still. Understandably the bigger housebuilders are all very keen at looking at nice greenfield sites. You then get a controversy with your local residents, but I think they are trying to improve the situation.

“The time delay in planning decisions and a lack of land available at realistic prices, in my opinion, do much to undermine the affordable equation stacking up. With the removal of certain funding, the housing associations are having to be far more creative about how they can bring opportunities to the market, both through developments of their own and joint ventures.

“Reality probably lies somewhere between the two points of view. I’m not convinced that a 25% increase in the North is actually going to be right, unlike London where pressure on prices is intense.”

Jeff points out that his company is not a big housebuilder, and that the views expressed are his personal opinion. But he says: “I do sympathise with young people trying to get onto the housing ladder. I think that’s a real difficulty still. The first big housing boom took many houses out of their reach. Now you need a big deposit to get onto the ladder.”

Nor does he agree with the Right to Buy policy which is allowing social housing to be sold without guaranteed replacement. “I can’t see the logic of introducing a right to buy scheme in a market place where there is not all that much affordable housing,” he explains.

“If Right to Buy was introduced at realistic sale levels - people have the right to buy at realistic level – I could perhaps see the value of that. Bu to take away affordable housing stock when there is already a shortage of it? I can’t see the logic.”

His own children, who are in their 20s now, will find it difficult to buy eventually, he regrets. “The difference in terms of proportion of one’s income, even to raise a deposit, is huge,” he points out. “I bought my first house in the ‘80s and was probably earning 80% of the value of the property I bought – a salary of £9,000 buying a flat worth £11,000.

“Now a flat may be £100,000. How many of us are earning £80,000 or £90,000? Even taking into account joint salaries it’s a different market. I believe in home ownership but it’s a difficult situation to be in now. I’m a cynic on election promises regardless of whatever government we’ve got. Time will tell the eventual outcome,” he reminds us.

But time, like savings, isn’t always plentiful.

 

It could be worse

The latest house price prediction suggests a 19% rise in house prices between 2016 and 2019, which would nevertheless be the lowest increase in the country except for Scotland.

The findings below, based on research published by BNP Paribas Real Estate, suggest the average jump nationally will be 24%.

 

Region

House Price Growth 2016 - 2019

Scotland

18.7%

North

19%

Northern Ireland

21%

North West

28.5%

Yorkshire and Humberside

26.5%

East Midlands

30.5%

West Midlands

34.9%

Wales

21.6%

East Anglia

26.9%

Outer South East

32.5%

South West

39.7%

London

24.8%