David Cameron is promising a “national crusade” to build homes so that the so-called “Generation rent” can become homeowners.
The last Labour government promised to build 200,000 homes a year, Tony Blair started to meet the target in his second term, with 219,070 permanent dwellings completed in 2006-2007. Since then, nearly 153,000 homes were built in 2009/10, but by 2013/14, the number of dwellings completed slipped to 140,960.
Kate Barker, the former Bank of England economist who carried out a review of housing supply for the last Labour government in 2004, concluded that around 240,000 homes were needed to be built every year to prevent a shortage of affordable homes and house prices spiralling out of control.
Perhaps seeing the embarrassment caused by making specific pledges on house building, David Cameron’s government has avoided promising a certain number of new homes. Despite this, industry bodies have floated a “modest” target of 200,000 a year, but the number of new homes being built is still falling far short of that.
Mr Cameron tried pretty quickly to get the housing market going, promising in 2011 that the coalition would “get the market moving”. However, this failed to stop the number of new houses being completed dipping from 146,850 in 2011-2012 to 135,510 the following year.
Before last May’s election, the Federation of Master Builders said that the target was “realistic and one that can be achieved if we remove barriers to small local builders”. But the current rate is struggling to break the 150,000 marker, which pales in comparison to the levels seen in the 1960s – with 378,320 homes built in 1969-1970.
David Cameron knows the potential rewards in delivering on house building can be immense, as previous Conservative leaders have found. When Harold Macmillan was given the task by Winston Churchill in 1951, as his housing minister, of building 300,000 homes a year, he was famously told: “It is a gamble—it will make or mar your political career, but every humble home will bless your name if you succeed.” His success helped keep the Tories in power for the next 13 years.
David Cameron says he wants to transform “generation rent” into “generation buy” – here’s how:
- Build 200,000 “decent, well-built homes with gardens” by 2020, sold at 20% discount to first-time buyers under 40
- Discounts will be offered on these “starter homes”, which will be capped at £450,000 in the capital and £250,000 outside
- Buyers will be prevented from selling them for 5 years
- Change planning rules to remove requirement for low-cost affordable rent
- Allow housing association tenants the ‘right-to-buy’ their homes
All of this is positive news for the number of new homes, BUT it is a steep target to attain, and as has been seen in the period from 2010 until now, breaking the 150,000 new homes has been a challenge, getting to 200,000 (let along 240,000 new homes) would seem unachievable.
So long as the “number of new homes” is less than 200,000 then there continues to be stronger demand than supply. Simple economics would therefore mean prices will continue to rise. Price rises are in turn good for the “property investor” and provide a long term capital return to be combined with a rental income to provide an attractive total return.
We continue to see strong demand from property investors throughout Rutland; Oakham especially, Northamptonshire; Kettering, Corby and Northampton, and the Peterborough area.
For further advice please do contact us.