Housing: A Crisis In The Making
By the end of 2011, the construction industry had built 113340 new homes of all description according to the latest figures available from the National Housebuilding Council. This is simply not enough given the latest population trends that are still being forecast by the ONS. This country has a population of 62 million people that it is struggling to support with a limited land area and limited resources. Neither has the issue of race or creed anything to do with the issue.
Due to more people living alone than co-habiting or getting married, the demand for new property never stops soaring with demand still outstripping supply. This is exacerbated by incoming migrants notably from the EU who come to find work over here because they are simply unable to access suitable jobs in their own countries. Often as not, they take on jobs that we would not be prepared to do on grounds of poor pay and conditions notably in the hospitality sector.
The government has connived at this situation for the last twenty years or more just to keep house prices going up. We all know that property values can and do slump once house prices have attained an unsustainable level such as 7 times average salaries. It is no wonder that the banking sector has become the butt of widespread public anger and not just over the current saga of bonuses for those at the top.
Where house prices rise by 15% or more over the medium term, this is guaranteed to do two things. It will distort the local economy and make it much harder for first time buyers even to get on the ladder. It pushes up wage rates so that employers in that town or region have to pay more to retain staff or even attract new labour. Sometimes a company can be made uncompetitive by this factor, particularly if it finds itself in competition with low cost producers abroad. This scenario need not just apply to London and the South East, it could occur anywhere else in the country.
It also creates a split across the country not just between the North and the South and can impede mobility of labour. No-one will relocate to another part of the country to find a new job if the cost of moving becomes utterly prohibitive. Also those in managerial positions will not move across the country if they perceive that once they have done so, they will be stuck in the particular area concerned, if they don't like it. This occurred in the 1980s when managers refused to go up North beyond the Midlands.
The Chancellor should be able to work out that an improvement in the supply of new homes could benefit us all and also act as a stimulant to improved economic growth. Once house prices attain a ludicrous level, this impacts on everybody and can ultimately derail economic growth. We are still trying to climb out of the present hole created by the banking collapse and then the present round of spending cuts to improve the nation's finances. It should also be obvious that those on low and medium incomes will need more not less assistance with housing and require a place to live. It is nothing less than a crime if this is not forthcoming.
(See www.nhbc.co.uk)
Mark Sandford - Permission granted to freely distribute this article for non-commercial purposes if attributed to Mark Sandford, unedited and copied in full, including this notice.
Members can discuss this and other articlees on the economics forum at International Mensa.