Building more Houses will Stabilise the Market

Many industry experts are warning that the current housing market recovery could be soured if more long-term measures are not put in place to further stabilise the market.

Help to Buy

A number of experts are concerned about the legacy of the Help to Buy scheme. The scheme was implemented in order to assist first time buyers, with just a 5% as opposed to a 20% deposit required in order to secure a property. Under the scheme, it is possible for buyers to have a 5% deposit, 75% mortgage and 20% loan, with is funded by the tax-payer.[1]

While critics acknowledge that the scheme is a good short-term fix, which will get the housing market moving, they warn that the long-term effects could be catastrophic.

Increases

Some industry economists are suggesting that by the end of 2014, average house prices in the UK will have risen by as much as 15%. Some even suggest that this number could be even higher.

Online property website Rightmove said recently that house prices in all regions, “are up year on year for the first time in nearly three years contributing to the positive national picture.”[1]

Building more Houses will Stabilise the Market

Rob Wood is an analyst who oversaw the last house market increase and subsequent slide from the inside of the Bank of England. Wood believes that after 2015, prices of property will rise to new heights. However, rising property prices, coupled with static wages have lead him to raise his concerns that there may be another housing bubble.

Wood said: “House prices thus reach the heart of Britain’s current policy paradox. Loose monetary policy works by boosting asset prices and encourage households and firms to spend now and save later. That boost can cause depression. But it can only delay the inevitable adjustments of saving, spending and house prices.”[1]

Mr Wood suggests: “To keep the economy alive today, policy has to do the opposite of what is needed to keep it alive tomorrow. The positive way this plays out is that the UK adjustment is less painful in the future. Eurozone austerity is due to ease off next year and the US will be through the fiscall cliff. With a stronger world, UK adjustment could be less difficult in the future.”[1]

For Wood, it is too risky for the UK to have to depend on other countries for bail. Instead, he feels that the best way to solve the issue is to build more houses to cope with demand and for a cheaper price. He believes that this will not only improve housing prices but will reduce unemployment.

[1] http://www.justlandlords.co.uk/news/Building-more-Homes-will-Stabilise-the-Market-1759.html