Politics is sub-optimal at present, especially in regard to housing, which is the last thing people want.
The notion that we can build our way out of the Housing Affordability Crisis is NONSENSE !!
When you consider that in this country, the total existing number of dwellings is probably well in excess of 30 Million AND …
If you accept that the maximum possible number of new dwellings that could be built in any one year these days is say 250,000, then you must deduce that the percentage of extra dwellings that could in practice be added to the existing housing stock in each year can only be a single digit number of percentage increase in any given year!
Assuming that you understand the economic theory behind house prices, to achieve a material change in such price levels by increasing the overall supply of dwellings, one would have to build in excess of 10%, more dwellings to begin with. If not that number, the effect of pursuing such a policy would be negligible, in actual practice.
In conclusion therefore, you would need upwards of two to three Million new dwellings to come onto the housing market, to even begin to affect house prices sufficiently to bring them down to more affordable levels by these means alone.
Also, as population growth continues, more and further residential development shall be necessary, even though this would be at the expense of the loss of agricultural and amenity land and would further damage our environment in the process.
The mathematical explanation:
Here’s the mathematical proof of why the current policy of building only a third of a million new houses each year, cannot be expected to have the effect of lowering the level of house prices currently prevailing in housing marketplaces all across the United Kingdom.
As explained, the expected proportion (in valuation terms) to have any material affect on current house prices to even begin to take place, would be an increase in the stock of housing of approximately 10% at least initially.
Calculating the minimum number of dwellings that would be initially required to be added to the existing housing stock, to achieve a 10% increase in stock – i.e. in the first year?
Say the total number of existing houses is (conservatively estimated) at 25 Million.
The original number of houses + 10% = 27,500,000 . This would be the total number required. The total number – original number = number of extra houses required.
27,500,000 – 25,000,000 = 2,500,000 the number of extra houses required. This is far in excess (i.e. approaching ten times the number that our government are expecting to be building i.e. 250,000 on an annual basis) !!
Calculating the actual percentage, of dwellings which would be added to the existing housing stock, if only say 250,000 additional dwellings were to be added in the first year?
New number – orig. number
——————————————- . X 100 = %
25,250,000 – 25,000,000
——————————————- . X 100 = 1% only.
Calculating the actual percentage, of dwellings required to be added to the existing housing stock, if supposing as much as 400,000 additional dwellings were to be added – for comparison purposes.
(Note the orig. number of housing stock would increase in each subsequent year.)
New number – orig. number
——————————————- . X 100 = %
25,400,000 – 25,000,000
——————————————- . X 100 = 1.6% only.
Both formulas 2 & 3 disclose the very significant shortfall of sufficient houses able to be added, to gain anything like the 10% minimum increase necessary, as calculated using formula 1, to start bringing house prices down significantly enough for them to be adequately affordable to a majority of current-day potential buyers.
This shortfall is far too large to even contemplate let alone justify a course of action such as the one currently being suggested, in order to attempt to bring house prices down over the relatively short term. The actual affect on price levels themselves would be both marginal and insignificant at best!
Further explanation regarding the proposed/revised selling process advocated under The House Price Solution:
In full response to the ‘lack of supply’ pontificators, whom are rather prevalent currently, the whole rationale or philosophy behind my carefully considered solution for restoring the housing markets around Britain to good health, embraces the wisdoms of bygone days. How so? There was a time when latin was in general parlance and the words: “Caveat Emptor” were in frequent use. The meaning of this should never have been forgotten.
This used to be an express warning which was applied especially where property or real estate was concerned. The words of the warning mean: ‘Let the buyer beware – unless they are covered by the seller’s warranty in terms of quality and worth’. The meaning of this simple latin saying amply describes why the current failures are occurring, manifesting within all housing markets up and down our still great country.
We should remember this because in actual fact it is the one thing which is required, in order to restore and correct the damaging anomalies surrounding today’s accelerating house prices. As explained, these anomalies arise from our having departed from and forgotten what were previously well-known and established wisdoms, to be relied upon whenever undertaking commercial transactions such as those involving the buying of houses for family use.
The problem of unaffordable house prices today simply isn’t a supply-side matter at all. It is a price-side problem not a supply-side one. A-level students studying economics ought to know this! Once this is understood, the requisite changes to the way in which our housing markets operate across the whole country may be realised so that they may, once again become normality. Central government necessarily would need to take a lead in resolving this current-day house price crisis of course.
In the local area where I live for example, there are clearly more than a sufficient number of houses that certainly could be used to satisfy both present and future demand for residential housing but they are not coming onto the market. Instead they are being used for non-residential uses. It is this that needs addressing most urgently, not the headlong rush to build more houses to satisfy a purely notional lack of supply when in fact, there is a more than adequate supply of suitable property both in our locality and in plenty of other locations all over the place!
Please consider what is being explained here and raise any relevant questions on this for public scrutiny and discussion. A campaign ought to be mounted to bring this matter to the attention of our government should those interested in this wish that to happen.
For the full details of how to address all these issues simultaneously, please follow the link:
How to Improve all local housing markets in England and Wales
Posted by: Peter Hendry, Housing Valuation Consultant
Author of:– The House Price Solution otherwise known as The Hendry Solution.
I invite questions and comments regarding this complete new way to restore all housing markets up and down the country, to return appropriate operational housing market conditions once again.
With better prospects for all wishing and needing to move house at any particular time I propose this as being the best and only practical solution to the house price crisis.
Market economics would be substantially improved using these newly explained techniques.