I have researched what’s causing house prices to rise and fall, as they have over several decades recently.
Having seen programs like BBC Two – Britain’s Housing Crisis, What Went Wrong?
it is clear that more detailed and renewed consideration is necessary to avoid further damage to our housing economy.
The BBC’s recently televised programs explain what the economists currently believe is causing the house price crisis facing homebuyers today.
However, I myself have come to a very different conclusion from that of the academic community. This might be something to do with the fact that I was trained as a valuation surveyor in the sixty’s & seventies and I’ve watched the continued cycles of price changes from then, into and through the next millennium – with increasing incredulity.
Seeing this happening, up front and personal so to speak, and knowing how others were feeling about this, has driven me to find and diagnose the real causes. My explanations are not from the viewpoint of an economist but are exclusively from that of a qualified valuer or a working surveyor’s standpoint.
The conclusions I’ve reached are therefore not only unique and easy to understand but are fully able to be used to remedy the house price crisis which we are now experiencing.
What follows is a brief explanation of my findings. The rest of my web site explains my reasoning in full and I hope you enjoy what I am able to describe to you here.
What are actually causing ever accelerating house prices relative to most people’s pay levels are two separate Financialisation anomalies which are both culprits causing house price crises within our British housing markets.
They act rather like a sort of fog, wreaking havoc for those driving their cars but instead, this state of confusion is allowing excessive pricing to not only exist but to accelerate, especially during times of financial stress. My conclusion explains why during such times as we have seen, particularly more recently, house prices tend to keep on spiralling upwards, before the inevitable correction.
If both of these two legislative anomalies were to be removed, housing markets across Britain would start to match general affordability and would also become price stable. This would bring desperately needed price affordability back to those communities that need this for their very survival.
The legislative instruments creating these two anomalies were both conceived a good long time ago. It is therefore perhaps understandable that they have remained intact because each seemed logical when they were originally made into law.
In chronological order, the first of these (anomalies) was the logic of extending the work of estate agents to cover both sides of the sale process of individual houses, both on behalf of buyers buying and sellers owning these.
The original purpose of having estate agents, going back more than a century, was to create specialised offices, essentially to advise large estates belonging to landed gentry for whenever they wished to dispose of land and buildings deemed surplus to requirements. In addition, these offices would negotiate any purchases on behalf of the large landed estates. The estate offices would work solely on behalf of their employers, with a view to negotiating the best price able to be negotiated as and when required.
The Estate Agents Act 1979 (enacted over 40 years ago), has since enabled estate agents legally to represent single house owners in selling such property as well as to allow any house buyer out there to also be represented. Unfortunately, doing this is causing what we now know of today as ‘Financialisation’ of the housing markets.
It is clear today that for individual house sales, agents should be limited to having to act for and advise the buyer primarily not the seller as well – in order to avoid causing the degree of house price inflation to which I am referring. However, to achieve this would require a change in the Estate Agents Act legislation.
A further explanation about this is given in the web page entitled: ‘This House Price Solution is devised to resolve the current housing crisis completely’. The link is below.
This explains that true market prices can only be determined by supply and demand in a perfect marketplace. In a perfect marketplace, the whole amount of homes on the market would be sold and the demand for them would also be fully satisfied at all times. The present UK housing market as a whole, is therefore very far from perfect!
IF, housing markets around the whole country were near perfect, economically speaking, it wouldn’t take a year or more for each house-move to happen. Houses and flats going onto the market would take much less than a year to attract a buyer ready to complete on their purchase.
There would then be fewer unsold and empty properties waiting to find buyers. Supply and demand would be in balance. House prices would enable this to happen and would facilitate sales to take place more swiftly than upwards of a year.
On the rental side of things, here markets are in a very different situation. There are far more people wanting to rent than there are rental properties available. Also, the supply of flats and houses is shrinking currently, which is forcing rent-levels to inflate. Demand for these properties seriously outstrips supply, economically speaking. Here, the obvious solution clearly has to be to provide more properties available for rent.
It should be noted however, if there were to be less unsold properties at any one time, there would be a lessening of demand for properties to rent, because more tenants would’ve become buyers! Therefore, improving buyers’ markets would clearly help with lessening the rental-demand side of things as well. That would be an important added bonus for both marketplaces, which is why ‘The House Price Solution’ is the final answer.
The second, and equally damaging piece of legislation for house prices has been the longterm use of some of the provisions enacted under the Town and Country Planning Act 1947 (conceived over 70 years ago). This Act was the first major one to start directing how and when land could be developed, or used for different purposes. It specifically provided for such decisions ultimately to be decided using powers vested in the Secretary of State to appoint a planning inspector. These officers are effectively appointed by central government acting on behalf of The Crown, as being the ultimate owner of all land outright sitting above the legal estates granted in fee, such as freehold interests.
(For those who want to know a little more about land tenure this goes back in essence to William The Conquerer, after which time all land in Britain effectively belonged to The Crown. A freehold title granted by The Crown can be an estate in fee . An estate in fee simple, for example, is the highest estate possible with the least restrictions. However, even that state of ownership is subject to the laws of the land as and whenever they may receive Royal Assent.)
Rather importantly, there has just recently been a new Act of parliament which received Royal Agent on Thursday 26th October 2023. It augments the operation of the Town and Country Planning Act 1947 (as now amended). This new Act of parliament is called the Levelling-up and Regeneration Act 2023.
It has been prepared by the Department for Levelling Up, Housing & Communities and comprises approximately 530 pages, It underpins the government’s current levelling up agenda and covers among other things, provisions concerning local democracy and town and country planning. It covers additional details about Local Plan making and Neighbourhood Planning for example.
However, in this newly enacted legislation the Secretary of State still retains the power to finally determine planning appeals by using the existing method of appointing a planning inspector to determine planning applications on appeal, irrespective of the views of the local community or even the local authority, including ones submitted under the new Local and/or Neighbourhood Development Plan rules.
I contend that modern-day decisions on things like land use and planning should, from now on, be allowed to be made locally and democratically, rather than autocratically or dictatorially as happens currently using the existing powers vested in the Secretary of State to appoint a planning inspector.
I contend that whenever a planning decision has been decided at local level, that decision should no longer be able to be superseded on appeal by a planning inspector appointed by central government.
Whilst such determinations may have appeared to have worked well initially in the distant past, as the years have gone by, things of this nature have become more and more fraught. Nowadays, we are all very much aware of the discord surrounding decisions ultimately being decided by planning inspectors whom are appointed by central government. This often happens when they simply do not accord with what local communities actually want and require of course.
Unfortunately again, the damaging aspect of such centrally made decisions is what we know of today as ‘Financialisation’. The result of decisions such as these, being made remote from the communities directly involved, causes progressive damage to the very community that these were originally intended to protect. This occurs through the loss of essential residential uses such as those for local first-time buyers. The result is houses which are mostly priced out of local reach, for local people, and this is the last thing these people currently require.
My suggestion for resolving this is for government to vest those representing local communities with full responsibility for determining local residential planning applications depending on which uses are most needed within the community and as provided for within the democratically agreed and adopted Neighbourhood Plans, subject only to an appeal on a point of law (for example, if there had been some misdirection or misuse of the legal framework of the application or of its tenure of ownership).
[For clarification, this should also mean that instances of National Policy Framework considerations should be within the remit of local planning committees to make determinations.]
It would clearly require a significant change to the existing Town and Country Planning legislation in order to accommodate these new fundamentals.
A further explanation about this is given in the web page entitled: ‘Manifestos of those political parties looking to attract winning votes at the next general election should include the following’. The link is below.
(This is about the manifestos of political parties looking to attract votes at the next general election.)
My conclusion is that with the twin changes pointed out here, local land use and the resulting prices of property being built, would be restored to price levels affordable by those living in their respective areas. Buyers could fairly compete to purchase residential property from sellers without interference by estate agents acting for sellers. Planning uses could be decided democratically using previously approved Neighbourhood Plans.
I contend there would be no downside from a governmental point of view, in accepting such proposals as I have outlined here.
As I say, top down solutions such as planning ones, especially residential planning applications, not only fail often but are becoming extremely unpopular for the reasons outlined. Devolving decision-making to those with the most to loose, (and/or gain), is the only logical alternative. I ask that these proposals therefore be thoroughly debated and I recommend that they be adopted very soon in order to deal with and fully resolve the exceptional difficulties now being experienced in satisfying modern-day housing need at affordable prices.
In peacetime (i.e. whilst our country is not at war with another), residential planning consents should be delegated to all local town or parish councils for them to determine, depending upon local housing need.
This way, genuinely democratic decisions may be arrived at using local decision-makers whom are best able to understand what the current needs of the community are at any particular time.
As a retired residential property valuer I remain convinced that if democratically elected local councillors were to be granted full authority to decide local residential planning applications, the effect of this could resolve the whole housing crisis.
Decisions made by such elected representatives would not be based upon NIMBYism ‘Not In My Back Yard’; quite the contrary!
Instead it would be a question of ‘IN My Back Yard’, as these councillors would be representing the wishes and needs of the local community – not simply trying to resist necessary change!
There could be no finer outcome than this, especially where residential property is concerned, because with this solution these councillors could work to actually resolve the housing crisis which we are now all being affected by, particularly owing to its increasing severity.
Outside links to the BBC:
Episode 1—Series 1 – How politicians promised home ownership, but with policies that sent prices out of reach.
Episode 2—Series 1 – How the strain on housing – from new builds to social homes – reached breaking point.
Finally, for more information on the necessary house marketing changes, go to:
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.