Fixing the UK housing market has long felt like a political pipe dream, but in its first year in power, the Labour Government has at least got the ball rolling.
RBC says the changes to planning rules and the £39 billion Affordable Housing Programme were “exactly what housebuilders needed.”
Under the new system, if local authorities fail to approve enough new homes, Whitehall will do it for them. As RBC puts it, “the message is clear: choose where you want homes built, or we will choose for you.”
On paper, it’s a breakthrough. The planning gridlock that’s dogged the sector for years could finally ease.
And with Housing Associations better funded and a longer rent agreement in place, builders should find it easier to get on site.
“Two of the key building blockers have now, on paper, been addressed,” RBC writes.
But the problems haven’t disappeared, they’ve just moved. The real concern now is demand.
Housebuilders don’t build homes for the sake of it. They need buyers.
And as RBC’s own “Home-fi” data shows, “demand is falling rather than rising”.
Gross reservation rates are 10% to 20% lower year on year, and while mortgage approvals have steadied, they’re still short of pre-crisis levels.
Incentives are rising too. Persimmon, for instance, is offering more deals to shift stock, and prices across the sector have been drifting down. It’s not a buyer’s strike exactly, but interest isn’t matching the new wave of potential supply.
RBC suspects the root cause is deeper than interest rates or sentiment. “We have divorced house prices from wages,” the analysts argue, “and now the biggest determinant of whether you will own your own home is not what you earn, but whether your parents owned their home.”
If the Government wants to meet its housebuilding targets, 1.5 million over five years, it may need to do more than just clear the way for construction.
Without tackling housing wealth inequality, the supply-side fix could end up as just another short-term patch.