Home Truths

Our polls rarely find housing among the most salient issues in national consciousness. But housing and house building has been more prominent of late.

There has been talk of a housing ‘crisis’, a stuttering economy and rising rents make affordability a real and present danger, and Britain’s history of boom and bust in the housing market also adds to worries about volatility (1). Some want to see house-building used as (Plan B) economic stimulus and the Prime Minister used his conference speech to hail a “Tory housing revolution”.

So far, house prices haven’t settled in to a consistent trend – the Halifax’s HPI has recorded a mixed pattern of month-on-month price movements – and negative equity hasn’t hit as hard as it did in the early 1990s recession (2). Mortgage-holders are benefiting from record low interest rates and an Ipsos survey in July found only 6% of them reporting difficulty paying their mortgage. But an estimated 96% of low-to-middle earners with mortgages stand to lose from a one percent rise in interest rates; 19% losing at least £1,000 a year (3).

Our latest survey for the Halifax, released last week, shows growing gloom and a lack of equilibrium in the housing market. While 53% think it a good time to buy, only 13% think the same about selling. Only 9% of owner/occupiers think it a good time to buy and to sell.

These sentiments have sharpened since April against a downbeat backdrop. Over that period we have also seen a swing in public opinion towards a view that the average UK house price will fall in the next 12 months. Interestingly, even among those who think the price will be higher at the end of that period, 75% think it will be a bad time to sell.

Little wonder then that estate agents ruefully report that many wannabe-customers are simply staying put and ‘riding out the storm’ to use Prime Minister Cameron’s phrase.

The picture is equally bleak for the 3.4 million households who rent from a private landlord. Benefiting from strong demand, landlords have put up rents to record levels (4). But renters think it’ll get even worse. 69% predict rents will get higher in the next twelve months; 15% think they will get a lot higher.

The implications are clear. The housing market reflects the state of the wider economy but also contributes to it. Interest rate rises would further challenge affordability, and rising rents already are. ‘Generation Rent’ (5) looks set to grow in numbers in the years ahead and confidence could affect an already stalling supply of new homes.

Against this backdrop, how does the Government push on with its social mobility agenda and does it do what Prime Minister Thatcher did by tapping into, and fuelling, the aspiration, and ‘right’ to own property. Or does it seek to manage expectations downwards, to encourage a dose of realism?

Whatever happens, public opinion is going to be crucial. The housing market is made up of property and people, and confidence is vital. On the supply-side, the Government’s planning reforms will see local communities exercising greater voice and greater influence in what happens where, with potentially considerable political implications.

Technical Note

Halifax Housing Market Confidence Tracker – http://www.ipsos-mori.com/researchpublications/researcharchive/2874/Confidence-in-the-housing-market-weakens-amid-the-economic-uncertainty.aspx

(1) Joseph Rowntree Foundation, Tackling housing market vulnerability in the UK, May 2011 (2) For more information on Halifax’s HPI see: www.lloydsbankinggroup.com/media1/economic_insight/ (3) Vidhya Alakeson in Homes for Citizens, James Gregory (ed.), Fabian Society, 2011

(4) 3.4 million households in England (source: English Housing Survey). Rent rises sourced from the FindaProperty Rental Index, October 2011 (5) Halifax Press Release – ‘Half predict Britain could become nation of renters within a generation (Credit crunch has created ‘Generation Rent’ in Britain)’, May 2011