{"id":4846,"date":"2016-12-30T07:00:40","date_gmt":"2016-12-30T06:00:40","guid":{"rendered":"https:\/\/ounews.co\/?p=4846"},"modified":"2016-12-30T07:00:40","modified_gmt":"2016-12-30T06:00:40","slug":"uk-house-price-outlook-2017","status":"publish","type":"post","link":"https:\/\/www.open.ac.uk\/blogs\/news\/arts-social-sciences\/society-politics\/uk-house-price-outlook-2017\/","title":{"rendered":"UK House Price Outlook: The long rise stutters, but not because of policy"},"content":{"rendered":"<p><em>Lecturer in Economics, Alan Shipman, discusses the delicate balancing act the government has to perform and why a new social divide may be emerging.<\/em><\/p>\n<p><iframe loading=\"lazy\" src=\"http:\/\/player.open.ac.uk\/embed\/8fa61eecc8\" width=\"480\" height=\"270\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>After another rise of more than 8% in 2016, UK house prices set for flatter \u2013 and bumpier \u2013 terrain in 2017-20. The likely levelling is mainly caused not by government efforts to boost new house-building and rein-in the buy-to-let landlords, but by the slower growth and higher borrowing costs now expected in the years preceding Brexit.<\/p>\n<h2>Bounced into building<\/h2>\n<p>There\u2019s now a cross-party consensus in favour of significantly stepping-up house-building in the UK \u2013 from around <a href=\"https:\/\/www.gov.uk\/government\/uploads\/system\/uploads\/attachment_data\/file\/572013\/House_Building_Release_September_Qtr_2016.pdf\">150,000 completions per year <\/a>at present to the 200,000 per year needed to address the country\u2019s <a href=\"http:\/\/www.managementtoday.co.uk\/uk-housing-crisis-disaster-own-making\/future-business\/article\/1380301\">long-running housing shortage<\/a>. The government has already shifted its policy emphasis from schemes such as <a href=\"https:\/\/www.theguardian.com\/money\/2016\/sep\/29\/closure-of-help-to-buy-scheme-confirmed-by-philip-hammond\">\u2018Help to Buy\u2019 <\/a>, which boosted housing demand, to initiatives designed to increase supply. These include relaxing the <a href=\"http:\/\/www.bbc.co.uk\/news\/uk-politics-33472405\">conditions for planning permission <\/a>, and making additional funding available. George Osborne in his last (2015) Autumn statement pledged \u00a32bn extra per year in pursuit of <a href=\"https:\/\/www.bonddickinson.com\/insights\/publications-and-briefings\/autumn-statement-2015-housing\">400,000 additional homes by 2020\u00a0<\/a>.<\/p>\n<p>More affordable housing is urgently needed to tackle the social problems that arise when houses become too expensive for most households to buy, even if mortgage interest rates stay low.<\/p>\n<p>The average house price in England <a href=\"https:\/\/www.gov.uk\/government\/news\/uk-house-price-index-hpi-for-july-2016\">rose above \u00a3200,000 in 2016 after another 8% annual rise<\/a>, while the average salary was still below \u00a327,000. That England average is distorted by London, where the average price of a home passed \u00a3480,000 in 2016. But even in lower-cost areas such as the North East (\u00a3130,000) and Wales (145,000), many households are no longer earning enough \u2013 after <a href=\"http:\/\/blogs.lse.ac.uk\/politicsandpolicy\/real-wages-and-living-standards-the-latest-uk-evidence\">over a decade of stagnant or falling real incomes<\/a>\u00a0&#8211; to raise a large enough mortgage for house purchase, or save the necessary deposit. With private sector rents rising in line with house prices, this unaffordability has a direct public cost \u2013 the government\u2019s rising bill for housing benefit, which reached<a href=\"http:\/\/visual.ons.gov.uk\/welfare-spending\/\"> 10% of the welfare bill (\u00a327bn) in 2015<\/a>.<\/p>\n<h2>Balancing act<\/h2>\n<p>More green spac<img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4850 alignright\" src=\"https:\/\/www.open.ac.uk\/blogs\/news\/wp-content\/uploads\/2016\/12\/e83db80a20f3083ecd0b470de7444e90fe76e6dd1bb315429cf1c0_640_cranes-300x204.jpg\" alt=\"\" width=\"356\" height=\"242\" srcset=\"https:\/\/www.open.ac.uk\/blogs\/news\/wp-content\/uploads\/2016\/12\/e83db80a20f3083ecd0b470de7444e90fe76e6dd1bb315429cf1c0_640_cranes-300x204.jpg 300w, https:\/\/www.open.ac.uk\/blogs\/news\/wp-content\/uploads\/2016\/12\/e83db80a20f3083ecd0b470de7444e90fe76e6dd1bb315429cf1c0_640_cranes.jpg 640w\" sizes=\"auto, (max-width: 356px) 100vw, 356px\" \/>es are likely to disappear under new-build housing because the government has to perform a delicate balancing-act. It wants to <a href=\"http:\/\/visual.ons.gov.uk\/uk-perspectives-2016-housing-and-home-ownership-in-the-uk\/\">make homes more affordable for the large minority (almost 40%)<\/a> of households who don\u2019t currently own them. At the same time, it doesn\u2019t want to inflict a price fall on the majority \u2013 still over 60% &#8211; who are still owner-occupiers, half with mortgages to pay back.<\/p>\n<p>This has increased the priority given to building low-cost \u2018new neighbourhoods\u2019 that are sufficiently different, in location and type of building, not to push down the resale prices of homes in older neighbourhoods.<\/p>\n<p>But the driveway to new homes in the UK is a long and winding one. Unlike the house-building booms of the 20th Century, in which central and local government played a central role, today\u2019s politicians are relying on commercial housebuilders and Housing Associations to meet those larger housebuilding targets. Those organisations don\u2019t like to build faster than will yield a profit, or at least ensure that all costs are covered. A range of economic problems ahead \u2013 including much<a href=\"http:\/\/cdn.budgetresponsibility.org.uk\/EFO-briefing-November-2016-slides.pdf\"> slower national output and income growth in 2017<\/a> , <a href=\"https:\/\/uk.finance.yahoo.com\/news\/weak-pound-boosts-uk-manufacturing-112408575.html\">higher import prices,<\/a> a <a href=\"http:\/\/www.niesr.ac.uk\/publications\/economic-impact-brexit-induced-reductions-migration#.WFj3BNKLSpp\">drop in migration if the government chooses \u2018hard\u2019 Brexit,<\/a> and an eventual <a href=\"http:\/\/www.standard.co.uk\/news\/politics\/bank-of-englands-mark-carney-issues-warning-to-millions-of-homeowners-over-rate-rises-a3294096.html\">rise in interest rates<\/a>\u00a0\u2013 is likely to make homes costlier to build and harder to sell.<\/p>\n<h2>A new social divide<\/h2>\n<p>So, despite hopes that an expanding <a href=\"http:\/\/www.generationrent.org\/\">Generation Rent<\/a> would force a big re-think on housing policy, this is still being shaped by the majority who own, and have invested heavily in their property. Despite recent efforts to restrain buy-to-let landlords by <a href=\"http:\/\/www.moneysupermarket.com\/landlord-insurance\/buy-to-let-tax-relief\/\">the Treasury<\/a>\u00a0and <a href=\"https:\/\/www.lovemoney.com\/news\/51618\/bank-of-england-buy-to-let-landlords-stricter-affordability-tests\">Bank of England\u00a0,<\/a>\u00a0a new social divide may even be emerging \u2013 in which more fortunate households <a href=\"http:\/\/citywire.co.uk\/money\/pension-freedoms-to-spark-buy-to-let-boom\/a801062\">own more than one property,<\/a> as part of their saving and pension plans, letting-out to less fortunate households who have given up on ever becoming buyers. And for those who do buy, more are likely to settle for a space-saving stacked apartment, not the detached home with garden on which grand visions of a <a href=\"http:\/\/www.lrb.co.uk\/blog\/2014\/04\/04\/aaron-bastani\/property-owning-democracy\">\u2018property-owning democracy\u2019<\/a> were traditionally built.<\/p>\n<p>Learn more:<\/p>\n<ul>\n<li><a href=\"http:\/\/www.open.ac.uk\/socialsciences\/main\/about-the-faculty\/departments\/economics\/courses\/\">Study Economics<\/a> with The Open University<\/li>\n<li>Read more <a href=\"http:\/\/www.open.edu\/openlearn\/profiles\/as23764\">articles by Alan Shipman<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Lecturer in Economics, Alan Shipman, discusses the delicate balancing act the government has to perform and why a new social divide may be emerging. After another rise of more than 8% in 2016, UK house prices set for flatter \u2013 and bumpier \u2013 terrain in 2017-20. The likely levelling is mainly caused not by government [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":4851,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[89,755,1102],"class_list":["post-4846","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-society-politics","tag-alan-shipman","tag-economy","tag-housing"],"_links":{"self":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts\/4846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/comments?post=4846"}],"version-history":[{"count":0,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts\/4846\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/media\/4851"}],"wp:attachment":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/media?parent=4846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/categories?post=4846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/tags?post=4846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}