peter williams, executive director, imla and university of cambridge the economy and the housing...
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Peter Williams, Executive Director, IMLA and University of Cambridge
The economy and the housing market post the General Election
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My presentation
• Focus on the latter and on England! • Complex dynamics at work• Many unknowns! • Conclusions
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The Economy
Many positives; • Certainty• Low inflation/falling prices• Strong Pound• Low interest rates and for longer? • Strong employment/falling unemployment• Rising real wages
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The Economy
• The MPC now suggest lower growth (2.5% not 2.9 in 2015 and lower going forward)
• Inflation expected to rise by end of 2016• Potential interest rate rises in 2016• Household spending still a key variable• Productivity still low• The Bank’s record!
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• Commitment to reduce borrowing, intervention and regulation
• Positives and negatives as GE highlighted• Uncertainty re EU referendum• Uncertainty re Scotland• Plus Greece, Ukraine• Concern re Current Account deficit (£98bn - 6% of GDP)
and impact on sterling• The impact of cuts – on people, sectors and local
government
The Economy
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Outlook
• Positive/negative• Many unknowns• Still unwinding interventions –QE, low
interest rates, Bank ownership etc• Process will be gradual• Responses not known
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Housing and the housing market
• Short term positive• Removal of threats re Mansion Tax and
PRS regulation• Confidence and sentiment• Though chaos re who is Minister –
Francois or Lewis –seems to be latter!
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Housing and the housing market
• Longer term less certain• Price inflation –manifesto big on demand,
weak on supply? • Cuts to local government reduce supply? • No real evidence supply challenge will be
met• Thus further price inflation/volatility
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The Context
• Housing supply not increased in response to a sharp increase in population
• Population grew by 7% to 60.4 million in the 30 years to 2005,
• The UK’s population increased by another 8% to 64.1 million in 8 years to 2013.
• Housing starts had only edged up from 139,000 in 2010 to 149,000 in 2013
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The Conservative Manifesto
• Our commitment to you:• The chance to own your own home should be available to
everyone who works hard. We will:• help to keep mortgage rates lower by continuing to work
through our long-term economic plan• build more homes that people can afford, including 200,000 new
Starter Homes exclusively for first-time buyers under 40 • extend the Help to Buy Equity Loan scheme to 2020 to help
more people onto and up the housing ladder, and introduce a new Help to Buy ISA to support people saving for a deposit
• give more people the chance to own their home by extending the Right to Buy to tenants of Housing Associations and create a Brownfield Fund to unlock homes on brownfield land
• ensure local people have more control over planning and protect the Green Belt
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The Conservative Manifesto
• No clear numbers on housing supply• Starter homes have issues• Right to Buy brings private borrowing of
£69bn into public debt• Help to Buy evaluation? • Green Belt protected yet…? • Nothing about PRS or Social housing
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CML Forecast December 2014
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IMLA Forecasts
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Housing Loans after the onset of recessions : 1980 to date
The numbers of home mover loans since the onset of recession 1980-to date
-80.00%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
quarters since recession
% ch
ange
1980;s 1990's 2008
The number of FTB and RTB loans made since the onset of recessions 1980 to date
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
quarters since recession
% c
hang
e
1980 1990's 2008
The Right to Buy Surge
First Time (inc RTB) Buyers Home Movers( 2nd or higher time buyers)
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Conclusions
• Overall outlook positive in short term for both economy and housing market
• Lots of possible threats –EU etc• But longer term both economy and housing
look more vulnerable• Housing issues unresolved and tensions
growing around prices/affordability and availability
• Meeting aspirations re owning/renting