Recommendations for UK Housing Market

The UK housing market is very significant for both the economy and the general population. Housing is the biggest form of wealth and also the biggest cause for financial difficulties. In the recent housing boom there have been clear winners, but, there have also been clear losers. These are my recommendations for a more equitable and efficient housing market.

More Flexibility in Supply

Increasing supply of houses, especially in property hotspot areas is important for dealing with the fundamental imbalance between supply and demand. Greater flexibility would prevent future rapid house growth caused by a bottleneck in supply. Admittedly increasing supply is easier said than done. However, I believe the government should take the initiative in building good quality council homes. - for either sale or renting to low income households.

Deal with Scandal of Empty Houses.

It is estimated that there are nearly estimates that there are 840,000 empty homes in the UK ( Empty Homes Agency) The National Land Use Database figures suggest there could be a further 420,000 homes in commercial properties. Making use of empty homes would go along way to relieving the shortage of supply, without the environmental costs of building in green belt land. (Why are they empty?)

Reduce House Price Volatility

House price volatility is a problem because rising house prices encourage speculation. Falling house prices can cause negative equity and a recession (i.e. last housing crash in 1992). To reduce house price volatility there are several steps the government can take:

1. Flexibility of supply (mentioned above)
2. Encourage long term(i.e. 10 years and more) fixed rate mortgages. This makes homeowners less sensitive to interest rate changes
3. Discourage Speculation through higher taxes on second homes.

Priority to Local Residents in Property Hotspots

the Nature of the UK housing market is that prices can vary enormously between different areas. In some tourist areas of National Parks, there is a real problem about locals being priced out by wealthy city dwellers buying holiday home. It is an emotive issue and to deal with it the government would need to:

1. Tax the purchase of second homes more aggressively. e.g. tax homes if not main residency.
2. Allow new homes to built specifically for local residents. (creating a two tier housing market)

Mortgages and Housing

Despite the credit crunch being a real problem, the UK mortgage market is not in a perilous state like the US. It is good that mortgages have evolved beyond the traditional 3 times income multiple of the 60s and 70s. Extending mortgage terms from 30 - 50 years instinctively gets criticised by many people. But, it may be a viable way for first time buyers to get on the property ladder.

• Government mortgage schemes for key public sector workers are a good idea and can be developed.
• Joint Mortgages - make these easier
• Subsidised Mortgages. There is a role for housing associations to help people buy houses through part mortgaging and part renting off a private agency.
• See also: help for getting mortgage on low income

Change Stigma of Council Housing

Mrs Thatcher wanted the UK to be a ‘property owning democracy’ It is an idea deeply cherished by the UK population. However, it is unfortunate that council housing has generated negative impressions. Also people can feel a failure if they only rent. The government can change perceptions of council housing by building low density / high quality housing to combat shortages in certain areas.

Prevent Gazumping

Despite, the introduction of government HIPS, buying a house can still take a long time. This leaves open the possibility of being gazumped - being outbid after initial offer is accepted. Gazumping is not legal in Scotland, the same could be done for England.