Desperately Seeking Clarification – The Housing Marketing and Brexit, 113 days in.

We are still desperately seeking clarification on the Housing Market and Brexit. 113 days have passed since the country voted to leave the EU.

The shape and vision of how that may look has not changed all too much since campaigners were campaigning and visionaries were visioning!

So what facts have arisen since that date? Well sterling has dropped by 16% and the FTSE has reached its highest ever. Many clever people will point to the majority of FTSE 100 companies enjoying the low rate of sterling for export sales. And they might be right. We are all a fan of a stronger pound against the Euro and Dollar so our holidays are cheaper and the bargains seem more ‘bargain’ like. It swings both ways. Conversely we see the cost of bringing raw materials into the country from the US and Europe rising. Perhaps echoed in the FTSE250 where the strong gains of its father index aren’t echoed.

So what? This doesn’t concern a first time buyer who is desperate to get a foot on the housing ladder. Does it?

Well it depends what you read, what you think and what you believe. RICS this week are reporting a modest recovery following ‘post Brexit jitters’ in buyer demand. Still close to historic lows but a recovery all the same. Rightmove have released a 30 percent ‘bounce’ in buy to let enquires since May. Connells have seen a 24% month on month increase in valuations from August to September. Now of course these could all be explicably linked to foreign investors and a cheaper pound. It would be clumsy to not note this. And clumsy because it has a real bearing. The average age of a first time buyer is now at 33, climbing from 30 in the last 20 years. Not a significant increase you might think, especially with people working longer and living longer. But the interesting facts go on, because only 33% of 25 – 33 year olds have a mortgage (English Housing Survey 2015). So only one in three own their own house at the average age of first time buying. So the answer is surely there must be lots of rental properties to house this ever expanding population of people that can’t jump on the ladder? Well, no. Let’s head back to RICS who just last month announced that an additional 1.8 MILLION more households will be looking to rent by 2025. And further more consider this: The number of UK households renting property rose from 2.3 million in 2001 to 5.4 million in 2014, according to Rics.

In 2007 the government whitepaper concerning new houses stated, ‘In 2007 the Government set a target of increasing the supply of housing to 240,000 additional homes per year by 2016. Within this overall target was a commitment to deliver at least 70,000 affordable homes per year by 2010-11, of which 45,000 were to be new social rented homes.  There was debate over whether this target would meet the demand for new housing and deal with the backlog of unmet housing need.’ (source – parliament papers – housing supply and demand). We are now in 2016. Last year circa 146,000 houses were built. 94,000 short on that target. A variety of politicians will talk about new house volumes but we are still at a point where the housing market would need to build an additional 33% to hit 200,000 houses, let alone 240,000. If you are crude with the math you might suggest that the void is potentially over a million houses short comparative to ten years ago, which already had its own shortage!

So that’s a lot for anyone to take in, but the point is this, even with the challenges of Brexit, even with weak sterling and a buoyant FTSE 100 performance, we remain critically low on housing stock. The challenge with any transition period is not waiting, or wallowing, whilst decisions are made. Confidence is a habit. Gloom is its nemesis. The housing market can’t afford any of us to be gloomy. Personally, I believe the future capability of future generations to purchase their own house lies with us all in this sector.

Simon Kidney
Chief Operating Officer