The 'lack Of Supply' Myth

[NEO72]

Now I know bulls regularly like to cite 'lack of supply' as the reason for rampant HPI over the past decade but I recently came across some statistics which appear to undermine this argument.

Between 2001 and 2007:

The UK population increased by almost 2 million. Office for National Statistics

New estimates from the Office for National Statistics indicate that the population of the UK was 60,975,000 in mid-2007, up by 388,000 (0.6 per cent) on the previous year and nearly two million more than in mid-2001.

Now, given that the average average household size is around 2.3 people, then we would need around 870,000 homes to house this increase in population.

So how many homes have been built over this period? 1.17 million!! Which by my reckoning is around 30% more than required for this increase in population.

Housing completions 1991-2007

So, is there anything I've missed or can we now bury the 'lack of suply' argument?

[Jie Bie]

Now I know bulls regularly like to cite 'lack of supply' as the reason for rampant HPI over the past decade but I recently came across some statistics which appear to undermine this argument.

Between 2001 and 2007:

The UK population increased by almost 2 million. Office for National Statistics

Now, given that the average average household size is around 2.3 people, then we would need around 870,000 homes to house this increase in population.

So how many homes have been built over this period? 1.17 million!! Which by my reckoning is around 30% more than required for this increase in population.

Housing completions 1991-2007

So, is there anything I've missed or can we now bury the 'lack of suply' argument?

Too many homes in the wrong places?

Not enough "desirable" homes?

A lot of the new "homes" that have been built were crappy city centre flats?

Demolition of old housing stock?

I also don't believe the UK's population is as low as 60million. The results of the census will be most interesting...

[catmandu]

I also don't buy into the supply argument. I suppose though you would need to remove the number of houses that have been torn down from the number built to get a real picture.

[SarahBell]

Too many homes in the wrong places?

I think they must have built about 800,000 flats in Manchester over the last 8 years. An appalling amount of monstrosities.

[Bloo Loo]

Too many homes in the wrong places?

Not enough "desirable" homes?

A lot of the new "homes" that have been built were crappy city centre flats?

Demolition of old housing stock?

I also don't believe the UK's population is as low as 60million. The results of the census will be most interesting...

what census?

[NEO72]

I also don't buy into the supply argument. I suppose though you would need to remove the number of houses that have been torn down from the number built to get a real picture.

Yes that would make a difference. Could only find figures for 1996-2004, but looks like around 20,000 homes are demolished per year:

5.3.3 Demolition and construction rates

Current levels of construction are relatively low, with around 167,000 housing starts in the UK in 2002-3. Demolition rates are also low – between 1996-2004, a total of nearly 160,000 dwellings were demolished, approaching 20,000 a year.

Link

So, given that 120K would have been demolished over that period, it's still a net increase of over a million homes.

[Van]

Yes, lack of supply is a myth.

I remember a few years ago Sledgehead had also debunked it also in exactly the same way.

[pyewackitt]

I'm always mindfull for the changes to residencial renovation that have happened in our housing stock... if you are a regular viewer of propety you will have seen the following:

1) House-chopping - A nice desirable family home is cut up into converted flats.

2) Wetroom/shower-room - It used to be the case when spending a few hundred grand that you knew you would at least have a bath, not any more. The fad for wetrooms has taken over and often i see crazy priced property with a single shower for 3 or more bedrooms.

3) En-suite madness - This is similar to above but where the renovator has decided every room should have an en-suite but there is no commual access toilet. Who on earth wants their guests and visitors to have to go into a bedroom to use the facilities?!

4) 'Friends' open-plan living space - I blame hit show Friends and the whole 'loft-style' build for this one but personally i like the idea of an eat in kitchen or seperate dining space and a seperate living room space. However, particularly with House-chopping, i frequently see what was once a large bedroom given a sink and a couple of units in a corner and suddenly it's chic loft-syle open plan living... it isn't... most of the time it's done on the cheap and nasty and you can barely fit a sofa and tv in the one living space let alone a proper dining/dinner table.

5) Calling anything under 8' by 8' a bedroom - used to be a time when a room that couldn't fit a bed in was called a boxroom or study, now it's just called a single bedroom... now that's ok until you realise that with space smaller than the one i've mentioned above you are hard pressed to fit anything else other than a bed in it... no desk... chest... closet... etc. If i wanted to sleep in a coffin i'd go to Japan and rent a cubicle.

6) Share of garden - now i don't know about you but personally i like the idea of being able to use and see the part of a garden i might own. Frequently on conversions where you see a 'share of garden notice' either the garden is dividing by depth and the top flat gets the bottom end of the garden (making it rather impractical) or it gets divided on width and you end up with 2 or more very narrow garden sections... if drives me up the wall when i see adverts talking about the wonderfull 25' by 5' share of garden that you can barely take two steps to walk accross... i mean why bother...

There are many more gripes... i wont even begin on those.

Overall our housing stock is bigger but our housing quality is far lower, our houses and flats are smaller, our living spaces are smaller and we pay far, far more than ever for them... then time will come when property is appropriately valued for what it is but that's stil some years away.

- Pye

[homeless]

illegal immigrants dont come up on any census or government data ie they offically dont exist.

i recon were close to a million illegal immigrants in the ops time period, just need to watch the customs programs on sky tv to know that lots and lots are getting through.

having said all that there was hardly any old building, any garden shed or outhouse that hasint been put into housing use in the last 10 years.

imho there is definetly no housing shortage there is just millions of underused houses ie high rent ones that only seem to get 6 months rental a year, holiday homes which have probably increased by a million over that period that used to be family homes and are now rented out for 3 months a year if there lucky. Then loads of city centre flats held in limbo and not rented as they dont want the carpet spoiled before they sell on.

So yeah there is an affordable housing problem, but all this held up property is now rushing on the market and will create a massive over supply.And we all know what will happen then.

i know its been said and said and said, but if the economy dont pick up by this summer we are in for the mother of all crashes

[winkie]

When people buy property as a store of value they do not require it to be occupied.......plenty of homes, just that more people have more than one (you can only live in one) and others that do not have any or share one home with others.........the only redress to this problem is for those that have more property than they require is for them to pay for the privilege.

[SarahBell]

Is there an easy way of working out how many new properties have been built in an area?

(Short of looking through planning or VOA by postcoding for a few streets,,?)

[PopGun]

Great.

Can we now also stop the HPC planning legislation/NIMBY/Tarmac everything green platitudes now?

[Number79]

Too many homes in the wrong places?

Not enough "desirable" homes?

A lot of the new "homes" that have been built were crappy city centre flats?

Demolition of old housing stock?

I also don't believe the UK's population is as low as 60million. The results of the census will be most interesting...

+1

There is no shortage of physical houses.

There is a shortage of houses in areas where people want to live and can get work.

[PopGun]

+1

There is no shortage of physical houses.

There is a shortage of houses in areas where people want to live and can get work.

I'm afraid this has always been, and always will be the case. Should commuting become unviable in the near future, it will only get worse!

So you can't afford to live where you want, well sorry but that goes for everyone else, and nothing but some spanish style socialist land grab will change it.

[Number79]

I'm afraid this has always been, and always will be the case. Should commuting become unviable in the near future, it will only get worse!

So you can't afford to live where you want, well sorry but that goes for everyone else, and nothing but some spanish style socialist land grab will change it.

The point is that those are the facts whether you are sorry or not. There is no shortage of housing to live in, there are places in the uk that you could buy a house for less than a descent second hand car.

This is also why some are seeing a crash whilst others are not. Desirable areas and places close to work will always be insulated from the worst effects of a downturn. As you point out, increasing fuel prices and commuting costs may even keep some areas flat or to gain inspite of a nationwide fall in average prices.

[koala_bear]

Yes, lack of supply is a myth.

I remember a few years ago Sledgehead had also debunked it also in exactly the same way.

During the boom a significant number of homes were always vacant due to the activity of flippers/developers artificially reducing the supply below the real level, now that it is/will be more difficult for these guys to turn a profit (how much of the increase due to the lick of magnolia paint effect was infact due to sitting on property that went up 10% in 6 months rather than the lick of paint???) will the supply level increase back to where it should be?

[Nuggets Mahoney]

I also don't believe the UK's population is as low as 60million. The results of the census will be most interesting...

Nor do I but it strikes me that people who aren't supposed to be in the UK are hardly likely to complete a census form

One thing's for sure, UK population estimates aren't based on the number of NI numbers in circulation...

Fraud fear as millions of NI numbers are lost

Edited March 11, 2011 by Charlton Peston

[NEO72]

The point is that those are the facts whether you are sorry or not. There is no shortage of housing to live in, there are places in the uk that you could buy a house for less than a descent second hand car.

This is also why some are seeing a crash whilst others are not. Desirable areas and places close to work will always be insulated from the worst effects of a downturn. As you point out, increasing fuel prices and commuting costs may even keep some areas flat or to gain inspite of a nationwide fall in average prices.

Less expendable income = HPI???

[winkie]

The point is that those are the facts whether you are sorry or not. There is no shortage of housing to live in, there are places in the uk that you could buy a house for less than a descent second hand car.

This is also why some are seeing a crash whilst others are not. Desirable areas and places close to work will always be insulated from the worst effects of a downturn. As you point out, increasing fuel prices and commuting costs may even keep some areas flat or to gain inspite of a nationwide fall in average prices.

What is a desirable area.....an ok place near a well paying job?.......things have moved on, why put up with an ok place, when you can have a real desirable place in a desirable place.Technology now means you can live in desirable places that were untouchable before, places that could not pay for themselves.......real money can be made in smaller communities that care, together with the technology that is there.

[plummet expert]

I also don't buy into the supply argument. I suppose though you would need to remove the number of houses that have been torn down from the number built to get a real picture.

There is no supply argument unless market conditions are otherwise normal. Clearly with the background of the financial crisis, unemployment ramping up, wages generally falling, inflation spiking up, no feel good confidence, then house sales will fall. They are and will remain very low until prices normalise with normal interest rates that seem stable, people stop losing jobs, the cuts are over with, the feel ok factor is back. Simple. House prices have been hovering on the precipice for about 7 months. They are very weak and it's the good old stand off going on, between obstinate sellers and would-be buyers with no mortgages.

Have you noticed that most of the main builders like Persimmon, have stopped doing many FTB homes. They did not sell! Their recently cited profit improvement was rung out of a faltering middle ground market. That may prove more difficult this year than they thought.

Edited March 11, 2011 by plummet expert

[Number79]

Less expendable income = HPI???

people have had less spendable income since 2008, have places like london/home counties/commuter belt crashed, remained broadly flat or gained?

[winkie]

people have had less spendable income since 2008, have places like london/home counties/commuter belt crashed, remained broadly flat or gained?

Gained in monetary price, lost in quality of life.

[REP013]

Now I know bulls regularly like to cite 'lack of supply' as the reason for rampant HPI over the past decade but I recently came across some statistics which appear to undermine this argument.

Between 2001 and 2007:

The UK population increased by almost 2 million. Office for National Statistics

Now, given that the average average household size is around 2.3 people, then we would need around 870,000 homes to house this increase in population.

So how many homes have been built over this period? 1.17 million!! Which by my reckoning is around 30% more than required for this increase in population.

Housing completions 1991-2007

So, is there anything I've missed or can we now bury the 'lack of suply' argument?

Neo, interesting but I need to question your statement, "average household size is around 2.3 people". How many properties are there in the UK? I often see quoted on here about 22 million. If this is true then there is one mother of a supply issue!

[Number79]

Gained in monetary price, lost in quality of life.

undoubtedly, just like the rest of the uk and just like the whole of the uk will continue to.

Not really all that relevant though is it?

[Fairies Wear Boots]

We clearly don't have an abundance of housing. Sure a shed load of people might lose their jobs and have to sell up soon, but it's not like we've got row upon row of good quality housing sitting around empty. We apparently have 900,000 thousand properties sitting around empty. But where are they? What condition are they in, and if you do manage to track down the owner and ask him if he wants to sell it'll be at market rates. Unless we find the owners of lots of them it's not going to increase supply.

True, nearly everyone is housed. But I think if you look at America, Spain and here, the difference is a huge over supply of properties.

Our "crash" is going much too slowly for my liking. Our bubble was/ is bigger than the states. The fact that we have been building the smallest sized units of housing in Europe, and not really keeping up with demand, means our bubble is deflating less quickly.