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Affordability second steppers and stamp duty: will we find any answers to Britains housing crisis in 2020

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Mon 03 Feb 2020

Affordability second steppers and stamp duty: will we find any answers to Britains housing crisis in 2020

ill the new decade have any answers to the old question of Britain’s housing crisis? This was the title of an event hosted by the think tank Resolution Foundation last week.

In journalism, there is a law that states any headline ending in a question mark can be answered with the word “no”. Betteridge’s Law was coined in 2009, more or less a decade ago. At the start of the 2010s, the average price of a house was just under £163,000, according to Nationwide; that’s £216,000 in today’s money. The average price is now... just under £216,000. It’s a similar story with average wages and interest rates. So, on the surface, nothing much has changed — yet underneath, everything has.

There has been a succession of policies affecting different sectors of the market. Do we need more, and what have we learnt from the past decade? It depends on who you ask.

In the rental sector, build-to-rent completions have risen by 30% in the past year — notably outside London, where they are up 50%, according to Grainger, one of the biggest private landlords in the UK.

The buy-to-let rental market is settling down after the shock of extra stamp duty and the phasing out of mortgage interest relief. But we have yet to see the effects of the change in council borrowing rules designed to deliver more social rental properties. Rents are still high, thwarting tenants’ efforts to save for a deposit to buy a home. Rent-to-buy schemes and shared ownership help here, and need to be improved and extended.

In the first-time-buyer (FTB) market, the inept Starter Home Initiative looks set to be replaced by the First Homes Initiative. Those in charge will need to take care to ensure that mistakes aren’t repeated.

Affordability is easing slightly and the number of FTB mortgages is on the rise. The government has pledged to help further still, with long-term fixed 95% mortgages.

Yet while attention has been focused on first-timers, second-steppers have been left “improving, not moving”. This is shifting the price point for family houses — properties that used to be the second rung on the ladder are becoming forever homes, as people dig out basements and add loft extensions. The gap between the average cost of a flat and a house is widening — in the Midlands, it has grown by 30% since 2017, according to Savills estate agency.

It’s no good throwing all your effort into getting buyers onto the ladder if they can’t get past the first step. More needs to be done. It is a similar story for downsizers. The right sort of homes simply do not exist in the numbers needed, and this imbalance means those that do have a hefty price tag.

At the top end of the market, high stamp duty continues to keep prices in check, and with Britain leaving the EU, it doesn’t seem appropriate to slap an extra 3% tax on non-resident buyers. It could stop any “Boris bounce” dead in its tracks in London.

Which brings me to the regional changes that the Resolution Foundation has noted in its latest Housing Outlook — with property prices starting to level up across the country since the 2016 referendum. Over the next decade, we could move away from a model where wealth emanates from the capital and the regions play catch-up, particularly if the government invests heavily in the north of England and the Midlands. People are already moving out of the southeast, investors are shifting their money and businesses are relocating their headquarters.

Wherever we build, it is important that we do it responsibly. Climate change, sustainability and air quality are going to be big issues in the coming years.

So, will the new decade bring answers to old problems? Betteridge is wrong: we do have the potential to change things for the better.


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