Transcript Document

The economy and the housing market post the
General Election
Peter Williams, Executive Director, IMLA and University of
Cambridge
My presentation
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Focus on the latter and on England!
Complex dynamics at work
Many unknowns!
Conclusions
The Economy
Many positives;
• Certainty
• Low inflation/falling prices
• Strong Pound
• Low interest rates and for longer?
• Strong employment/falling unemployment
• Rising real wages
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!
The Economy
• 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
Outlook
• Positive/negative
• Many unknowns
• Still unwinding interventions –QE, low
interest rates, Bank ownership etc
• Process will be gradual
• Responses not known
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!
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
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
The Conservative Manifesto
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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 longterm 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
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
CML Forecast December 2014
IMLA Forecasts
Housing Loans after the onset of
recessions : 1980 to date
The numbers of home mover loans since the onset of recession 1980-to date
The number of FTB and RTB loans made since the onset of recessions 1980 to date
100%
80.00%
80%
60.00%
The Right to Buy Surge
60%
40.00%
20.00%
% change
% change
40%
20%
0%
0
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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
-20%
0.00%
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
-20.00%
-40.00%
-40%
-60.00%
-60%
quarters since recession
-80.00%
quarters since recession
1980
1990's
2008
First Time (inc RTB) Buyers
1980;s
1990's
2008
Home Movers
( 2nd or higher time buyers)
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