What this country requires for solving its housing crisis is, most of all, a new and dynamic Buyer-Orientated marketplace, where buyers can straightforwardly find and secure the most suitable houses for themselves, whenever this is necessary.
The objective is to create a housing market where prices also find their market levels depending upon the information supporting those prices. This should primarily come from within the housing location involved and would require this information to be genuine and accurate. If a true balance between buyer wealth and seller aspiration could be accomplished in this way, all local housing markets could start trading more smoothly and more effectively than has happened since the end of the war, i.e. since 1945. The rationale for this is more extensively laid out on this web site under The House Price Virtuoso Solution.
This is the broad picture, which I am painting in outline here. The proposed new service would transform the existing experience of those trying to move house from that of experiencing the difficulties of a moribund housing market (the situation at present), into a certainty-orientated market, with plenty of buying opportunity and more choice.
Bringing such opportunities forward would transform home ownership and allow it to become more popular than ever before and be a way to enjoy added financial security as well as providing houses for individuals and families to live in.
To provide an example of why this change is so vital I would single out one scheme that was certainly intended to bring more buyers into the housing marketplace: Help To Buy. Whilst the name of the scheme ‘Help To Buy’ attempted to describe what it intended to do, it wasn’t long before it was rather more poignantly re-labelled by many users ‘Help To Sell’ because that is actually what it was doing. It was really functioning to do precisely that, at prices which were being set primarily by the big house builders.
We now hear that ‘Help To Buy’, which is already restricted to use by first-time buyers only, will soon be further restricted to be for loans only for new houses from 2021.
It will also have regional price caps, designed to try and reduce the maximum value of homes that can be bought through the HTB Equity Loan Scheme! This is clear proof that the scheme never fulfilled the purpose for which it was initially designed and therefore, has massively underperformed.
Help To Buy is due to be withdrawn completely by the government by 2023 but the question remains, what should be its replacement?
The path to be taken for adequately dealing with the present housing crisis is not clearly evident. At present there is no known or obvious path to be taken. Nevertheless logical deduction from an economic viewpoint unquestionably does now point towards one.
It is a path able to show the how and the why. How, exactly, it could be achieved is at:
The House Price Virtuoso Solution How house price stability may be achieved.
It is a full explanation of how to correct the present economic imbalances within the housing market and it provides reasoned explanations.
Now for the why:
Various changes to the operation of the markets are certainly required and what these changes are, becomes self-evident when the effects of the present distortions are better understood, using the analysis presented.
The most significant change involves the role of those within estate agency and as a significant number of players involved in this sector are qualified surveyors, I am drawing this to the attention of RICS. My web site gives the detail necessary to provide a clear overview of the problems needing to be dealt with together with their solutions.
Changes of this nature will always need to go hand-in-hand with the courage to actually put them into effect and, if both of these attributes are combined, amazing results can be derived.
At present new housing supply, even with a favourable wind behind it and with maximum impetus from the government, is only growing by a few thousand new houses per year.
Relying on this rate of growth in supply alone, would only bring a tiny net gain as a percentage of the overall number of houses built.
The effect on market prices of such a tiny net gain can, therefore, only be minuscule. Confirmation of this truism is plain for all to see – especially for valuers noting the continuing increase in house prices despite everything done to try and slow this. There has to be another way forward.
In essence, the way of progression which I am pointing out here, is to deal with the current oversupply of ‘borrowings’ which result, directly, in house prices becoming UNaffordable for those unable to access such mortgage finance themselves.
The effect of denying specifically new buyers from gaining reasonably affordable access to the the housing market in this way must, ultimately, cause market stagnation – something that no-one would happily encourage. Unfortunately though, many of us are already seeing this is beginning to happen.
In other words, without first time buyers buying at sustainable prices to them, the whole market for houses will eventually start becoming tentative, sluggish and may even stagnate – something which buyers are, worryingly, now seeing of course.
For years we have heard the finance industry telling us that we need to borrow more and/or that more finance is available to do this, especially for all house purchases.
What they haven’t been so keen to explain, is that more borrowing results in higher house prices. This is the dilemma which is causing new houses to become UNaffordable and that will, of course, proportionately affect first-time buyers much more than anyone else.
To resolve this dilemma would involve convincing ‘the main financial institution’, as the Big Muscle in the economy, to change tack and go along with the proposed new trajectory of travel which I am placing before you here. The arguments in favour of doing so now far outweigh those in favour of maintaining the status quo.
Please read as many of my supporting explanations as you would like to on this web site. They give viewpoints from various different positions, culminating in the thought-out new proposals set out in ‘The House Price Virtuoso Solution’.
Anyone can raise questions or make comments on the site itself if they should wish. I intend to try and respond to all such questions and comments with suitable replies to the best of my ability.
My aim in presenting these ideas now is to ignite interest in changing, for the better, housing markets in all locations, i.e. the individual ones which function locally across England and Wales. By providing a way for them to operate more efficiently, the improvements achieved would then filter across the whole country and all housing markets would start to function more dynamically and as a single entity.
Posted by: Peter Hendry, Housing Valuation Consultant