Tuesday, June 3, 2008

What housing shortage?

What housing shortage?

The consensus view, and the argument the housing-market optimists use when trying to present a long-term bull case, is that Britain has a chronic shortage of housing. Yet plenty of evidence points the other way...

Posted by damien @ 10:03 AM (1864 views)
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22 thoughts on “What housing shortage?

  • mark wadsworth says:

    Exactly. If there were a geniune shortage, then rents would have risen in line with house prices (trebled or quadrupled over ten years) rather than in line with ages (a bit less than doubled over ten years).

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  • So it’s just a question of bringing potential dwellings into use. But it was only a couple of weeks ago that a MoneyWeek article rubbished Brown’s idea of bringing such places back into use. http://moneyweek.com/file/47370/no-oil-or-housing-shortage-just-a-lack-of-common-sense.html

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  • I’ve long suspected this, but it’s nice to see some numbers attached.

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  • Icarus – But it was only a couple of weeks ago that a MoneyWeek article rubbished Brown’s idea of bringing such places back into use

    The point I think she’s making in that article is that the £200m earmarked would barely touch the sides and that it’s a bad ‘investment’ any way you look at it.

    The article is agreeing that there’s no ‘shortage’ of property here in the UK – don’t see any contradiction in this, tho moneyweek can’t seem to make it’s mind up about oil… Nothing to do with HPC tho so i’ll shut up about it.

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  • mark – like the typo – rents rising in line with ages.

    Or is that one of your latest ideas? LOL!

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  • The shortage of housing has been the biggest myth to appear in the last 10 years.

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  • mark wadsworth says:

    Aaargh! “wages” obviously. And I spelled “genuine” wrong.

    Re this bringing back into use crapola, it’s far simpler than that, as I have explained before. The same applies to commercial premises as well.

    Problem solved. Next.

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  • Two weeks ago, Redrow (LON:RDW), one of the UK’s largest housebuilders, chopped 15% of its workforce and hinted at more to come.

    But they still aren’t dropping their prices are they?

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  • The size of Brown’s proposed intervention isn’t the point, and if it’s a bad investment why does today’s article appear to be in favour of such intervention? If Stevenson isn’t in favour of doing something along the lines of Brown’s proposal, what’s his point?

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  • Oops. Should have said: 9 is a response to 4

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  • mark wadsworth says:

    Aaah, Redrow, they are dropping their prices but in a clandestine sort of way, I covered the recent changes to their Reassure package here.

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  • Icarus,

    I don’t think the article is in favour of that kind of intervention. I think David is hinting that 2nd homers, BTL people and whoever owns these derelict properties should get their grubby mits off them and release them back into the market so somebody can actually redevelop/live in them.

    Browns £200m is a token bailout for home builders which would be better slung at regeneration projects in grotty run down neighbourhoods to make them livable again.

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  • Mark – I think your suggestion on commercial premises/tax may not be a good idea. Unlike housing where you can reasonably guarantee a fairly constant supply of tenants – commercial building occupancy is related to the booms and busts of the economy.

    Most spec build industrial units are put up during boom periods. A lot of them then inevitably end up being finished just as the bust starts. But this didn’t matter up till now as they sat empty until the end of the bust and were there, ready, for when a fledgling business wanted to rent somewhere to set up shop. The developer didn’t have to pay rates or tax if they were left with an empty industrial unit.

    Now, developers aren’t going to risk being stuck with paying rates all through a bust period. They simply won’t build until the unit is ordered by a company. But a fledgling business is in no position to order an industrial unit. They need to rent on an easyin/easy out basis to start.

    So there will be much fewer spec builds. Brown’s tax grab will make it much, much harder for new business to start up and grow as the supply of prmises will be much reduced.

    The man seems to know the price of everything and the value of nothing.

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  • Still-waiting says:

    I would argue that there is a shortage of housing in some areas (ie most of the South East). Half of the 740000 empty homes have been empty less than 6 months and will naturally come back into use. Of the remainder, many are city centre flats and many others are places that no one wants to live. There is a shortage of APPROPRIATE housing in some areas. Yes, there are empty properties, but I have a family. I do not want to live in a 7th floor flat.

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  • crutchley @13 – Let’s agree. There are three main sources of potential dwellings without more new-builds: empty new-builds, ‘dilapidated’ dwellings and space above shops. It could be that Brown was thinking only about the first and that David Stevenson is suggesting all three – he doesn’t say what or how. My point was that the two MoneyWeek articles didn’t sit easily side-by-side and that more clarity is required. To get to a more substantive point – why are there so many unoccupied potential flats above shops near city centres? Is it the taxation system?

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  • mark wadsworth says:

    Cornishman, your argument only stacks up if you assume booms and busts as a given. The point is that it is property/credit bubbles that cause the booms and busts in the first place.

    LVT would dampen price rises (it acts like an extra interest rate on land element) and cushions against falls (land values falling, at least people’s tax bills go down automatically).

    And for an X amount of supply of commercial premises, the ideal price to be charged is whatever clearing price is needed to get them (nearly all) full. So in downturns, rents will fall automatically (helping all businesses, not just start ups) and with falling rents, land values fall, so the LVT bill falls, so the property owner gains on the swings what he loses on the roundabouts.

    LVT, is by far and away, the least bad tax.

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  • icarus,

    Yes i think we’re agreeing on the fundamental point – that there’s loads of unoccupied property that needs liberating or fixing up and then liberating – so no argument here

    *shakes hands*

    My criticism of Brown’s idea probably stems from my current cynicism (and i’ve supported him broadly for years) that his motivation is not to help out the needy (I agree that we need more social housing as we walk headfirst into a downturn) but to put a matchstick under the housing market and give a bung to housebuilders by purchasing these properties pretty much at the top of the cycle. So perhaps it’s all about timing.

    I’d be much more in favour of this kind of policy if the govt bolstered up it’s supply of social housing by scooping at the bottom of the market and thereby provided more social homes and gave the taxpayer better value for money all at the same time.

    This £200m is presented as a win-win (helps the homeless by increasing social housing – helps the economy by keeping housebuilding companies in business) but the reality is that it’s a lose-lose situation (keeps the bubble inflated for a while, pricing most of us out – gives bad value to the taxpayers who’s money it is)

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  • cornishman says:

    mark – I take your point about a least bad tax.

    But I think it’s too optimistic to expect booms and busts not to happen. I can’t see a land tax ‘coming down’ to reflect reduced land values. That’s just not what would happen in practice. How many times a year would the land be valued – and who would do it? I have some industrial premises and the ‘rateable value’ does not reduce in recessions to reflect the fact that I couldn’t rent it out for anything like what I could in a boom. It stays the same. And then gets bumped UP every 5 years. I suppose, if tax/rates did reduce when activity reduced, then it could encourage more business and so even out the peaks and troughs.

    But that would mean a government prepared to reduce its tax take if economic activity tails off – and that would mean putting aside some money when economic activity was booming. Which politician is going to save some money and not appear as beneficent as they can today so that the politicians after them can keep things going in a downturn? It’s not going to happen.

    Anyway – I think we’ve been here before on this one. Let’s agree to differ!

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  • We need the “Database of Occupable Volume” – I think there is one on this site.

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  • the haunted says:

    I have never had any trouble finding a property to rent and there are plenty to buy too when I have a peak. So what is all this crap about a housing shortage?

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