The housing market has grown at a rapid rate over the past 20 years.
The purchase of former council properties has grown in popularity, the buy-to-let market has flourished and more people are aspiring to get onto the housing ladder than ever before.
Brokers have had a raft of options open to them to complete business, be it through well-trodden prime routes, right through to the roads less travelled, such as equity release and commercial.
However, great demand for property in the UK coupled with rising house prices has stifled people’s opportunity to make moves on, or up the property ladder.
With suggestions that for every property there are eight interested buyers, it is no surprise that borrowers have complained about the lack of affordable housing. The lack of stock has helped to drastically push prices up, and brokers have found placing cases harder than ever before.
Although in recent months UK house price growth has slowed, it remains a central theme that if there are far fewer properties than potential buyers prices will continue to increase.
In its own assessment of the market, Halifax suggested that house prices had increased by 4.5 per cent from January 2007, to January 2008, although this figure was coupled with the fact that for January 2008 prices had remained unchanged from the previous months’ findings.
As a result of the continued gap in affordability and the UK’s obsession with home ownership, the government has had to step up and show its intention to improve housing stock and the opportunities available to enter the housing market.
But the question remains if its moves have had any lasting or positive impact on the housing market, improving confidence and take-up within the housing sector.
Government changes
The Labour government, under both Tony Blair and Gordon Brown, has made concerted efforts to improve home ownership for aspiring buyers, while also providing opportunities for people with properties to take the next step up.
Home ownership schemes launched by a number of lenders have received government backing, while the government is setting in place plans to tackle the issue of council housing and prioritising property availability.
Brown has also reiterated his desire to drastically increase the number of available and affordable homes on the market.
But what must also be remembered is that while lenders and other organisations have strived to improve the affordability of property for aspiring buyers, the UK has adapted a more ‘European’ approach to housing, with more ‘young professionals’ choosing to rent rather than buy.
Buoyed by their desire for freedom of movement, many have decided that renting best suits their lifestyle choices. Although many borrowers refer to renting as ‘dead money’ it is clear that it is growing in popularity, which has led to a marked increase in the popularity of buy-to-let (BTL).
Indeed, research conducted by the National Housing and Planning Advice Unit (NHPAU), indicated that the BTL sector had in fact led to an increase in overall property prices, boosting prices by 7 per cent.
Although good for those already on the ladder with the ability to sell, this revelation exacerbated fears that the sector was forcing out aspiring home owners; an opinion that Stuart Law, chief executive at Assetz, was quick to dismiss.
Law says: “Figures from the NHPAU have backed our standing opinion that BTL investment has not significantly affected house prices in the UK to the detriment of first-time buyers. With prices reported as only an extra 7 per cent higher due to BTL investment, the benefits of the sector outweigh the disadvantages.”
Rapid growth
Officially launched just over a decade ago, the BTL market has seen rapid growth, and investors over recent years have made strides to appeal to as diverse an audience as possible.
Properties for all budgets are available through BTL, with Michael Ballack, the Chelsea midfielder apparently on £130,000 a week, claiming that properties in the UK were too expensive which had led him to make the decision to rent.
Still achieveable?
So what has the government done to help improve the housing market, and are its plans still achievable?
In her first speech as Housing Minister, Caroline Flint reiterated the need to increase home ownership levels, and set a government target, which aims to see 80 per cent of the population as home owners by 2020.
She said: “The acute housing shortage, with all its problems and implications, is well known and well debated. This isn’t an abstract issue of supply and demand, a dry topic for economists and commentators. It’s a practical, immediate problem with very real consequences for thousands of people across the country.”
Home ownership schemes, have been largely ignored since their introduction and it has been suggested that knowledge among intermediaries and the wider public is very low.
The housing associations responsible for allocating funds have also come under criticism for setting unrealistic targets, both for the time span in finding a property, and then for completion.
A Nationwide spokesperson confirmed it was pleased with the response it had received from aspiring first-time buyers, but was unable to provide further details of exact figures.
Contradictions
The government has an obvious desire to improve housing stock and the availability of affordable, sustainable property in the UK, but many of its proposals seem to contradict each other.
On one hand, there is the desire for property but on the other hand admitting that it will have to be on green belt and flood plain sites – sites that the government in separate legislation have claimed to want to sustain.
An urge to promote home ownership among aspiring first-time buyers, but a refusal to increase Stamp Duty in line with inflation, and the promotion of a shared ownership scheme designed to get those with limited income on the housing ladder, but a starting budget of £30,000 a necessity are other examples.
In Brown’s first speech in his role as Prime Minister he set out a clear plan of action for improving housing stock and affordability, with an announcement that three million extra homes would be built over the next 12 years.
However, only last month these figures were rubbished, with housing developers stating that the demand for so many properties was non-existent. Prospective buyers have been warned off by stories of fraud on new build properties, while other industry commentators have suggested that new build properties offer little scope for any substantial increase on a return for the money.
The plans have also come under fire from various organisations who have claimed that the plans are unmanageable as the buildings would encroach upon green belt land and flood plains.
In an early assessment of the government’s plans to increase the number of properties available, by 240,000 a year, Chris Cummings, director-general at the Association of Mortgage Intermediaries, admitted that a more thorough investigation was needed before it could be assessed if the government’s plans were manageable and achievable.
He said: “Presently the UK is managing to construct around 160,000 new homes, some way below the growth in households of around 200,000 per annum. In addition, many of the planned areas of expansion are on flood plains.
For example, 160,000 new homes are planned to be built on the Thames Gateway by 2016. With weather patterns becoming less predictable and sea levels rising, damage to properties that are vulnerable to flooding will become a growing problem. If this affects demand for properties in these areas, halts in development will mean building targets will not be met.”
Clouding judgement
It is the responsibility of brokers to offer solutions to meet borrowers’ needs, but with the desire for home ownership sometimes clouding borrower judgement it is sometimes very hard to dissuade borrowers.
With repossessions on the increase, the job of the broker has never been in more demand or more important, and with many borrowers soon to come off of their initial rate period, brokers look set for a busy few months ahead.
But government organisations have come under criticism for the deafening silence at a time when it is more important than ever to promote the need for knowledgeable advisers to help confused borrowers.
However, Hugh Nichols, proprietor at Badbury Berkeley Financial Services, claims that the industry, and not the government should be responsible for highlighting advisers’ worth.
He says: “The government is doing nothing to promote the use of brokers, but by the same token I am not sure how much it should do. Lenders are not making it easy for borrowers to switch their mortgages after their initial rate has run out and so many borrowers don’t bother and are left on the higher rate. Something should be done about this.”
However, Nichols adds his disappointment at the government’s continued hypocrisy of its pledges, particularly relating to housing and the environment. “The government has pledged to go green, but has also said it wants to build more houses. It can’t do both. What is going to happen in 80 years if the population continues to grow?
"We can’t keep building properties to keep up with demand, and although the move to increase the number of properties will probably be welcomed by aspiring first-time buyers, I can’t see that many other borrowers being happy about the continued growth in the number of buildings being erected.”
It is clear that the government is committed to making changes to the housing market, specifically with regards to the issues surrounding affordability and improving the volume of properties available.
However, it seems that its plans have become a muddle of public sentiment and ill-informed plans. If the government is going to improve its approach to improving the housing market it needs to take a step back and re-assess its positioning.
