The Housing Shortage Timebomb

Sir_Humphrey

dgl1001 wrote: »

Blue Monkey - i'm really struggling to understand what you you are trying to say - are you saying that there is is not shortage of housing?

The trouble with the supply argument is if there was a shortage of housing now, there was also one back in the mid-1990s. Nothing has happened to the underlying supply/demand situation to justify prices more than doubling since 1999.

If a shortage of housing is leading to price rises, why have rents been so static for the most part over the last 10 years? Indeed, rents have been falling in 2009 in the outer London area I have been looking at. The main reason why prices have increased to the extent they have is down to overly lax lending causing a housing bubble.

I do not deny that we need more housing in the UK, and that the fundamentals of supply/demand will always make UK housing more expensive than the USA or France. However, the question is the extent of the expense - prices could fall a lot more and still be more expensive than those countries with plenty of land and loose planning laws.

The shortage of housing manifests itself in overcrowding. If something cannot be afforded, people consume less of it. This is a process called demand destruction. The only reason demand destruction did not occur before the credit crunch was lax lending.

Bogof_Babe

Britain needs new homes to help combat a growing population.

Strange choice of experession. Are they (the growing population) the enemy? I'd have thought "accommodate" would be a more appropriate word than combat.

dgl1001

blue_monkey wrote: »

I am saying that IF there is a shortage of housing then people will deal with it.

There IS a shortage of affordable/social housing.

I can drive around my town and see no end of houses being available. However, they are not ones that people can afford to buy nor rent.

I myself, with my family, faced homelessness 2 years ago because my mother was selling the house we was living and maintaining for her (there is a long story there, we got shafted big time but it is not for now). We had been on the housing list (back up really) for a long time but they told us that if my mother wanted us out she would have to take us to court etc... which is what she did.

My husband earns an average wage, I am a carer for my son who is disabled, we have no childcare so working is not an option for me as no-one will look after hime. Likewise as was not moving as my husband needed to stay in this srea for his job.

There was no end of houses we could have gone to live in but..... my husband had to be BRINGING HOME 3 times the rent before we could even look at a propert. The cheapest rents of which were £900 a month. The council told me that it was an 'exeuctive wage' and I said that is what they are asking for. Buying was obviously not an option as we had ploughed all of our money into my mothers house (don;t even get me started on that one...).

So there was plenty for us to rent but not that we, average wage earners, could afford.

Locally they built lots of apartments - could not sell any and they are now occupied by people from the HA.

Long winded sorry but felt there needed and explaination.

So, no, I do not believe there is a 'housing shortage', the papers are full every week with houses, many have vacant possession. There is however a shortage of affordable housing and this is what most people are in need of.

There is a programme on Monday called How Money Changed Us - BBC2 9.00 I think. Might be very interesting to watch.

I think you make some very good and valid points about overcrowding and the price of housing generally. However, I think where I would dissgree agree with you is the housing shortage part. Every thing you talk about is becuase there is not a suitable supply of housing for everyone and while you may not be able to afford properties at this stage of your life, it is the people who can, who will sustain prices in the future. So for me (and i appreciate that everyone is different) there is a massive shortgage of housing.

blue_monkey_2

Laethia wrote: »

PS when my Grandparents bought their own house it cost £95...they lived in it until they died in 2001 when it was worth £120k!

I think we will also start seeking our own solutions to the housing shortage. Adult children living at home unable to afford their own accomodation will likely start better utilising the space in their parents home...eg garage conversions/"granny" flats...even those log cabin houses that can be built in the garden as a seperate bungalow! I think planning permission will eventually be easier to get for such constructions out of neccessity. I'd be quite happy to move into a log cabin with my partner in my mothers garden if the planning rules for her area allowed it!

Absolutely, we have room at the bottom of our garden for a log cabin, if my kids need one then we will apply for planning permission for it.

Indeed when we faced homelessness we looked at buying a caravan and moving between caravan sites every 2 weeks as there was a limit on how long you could stay for.

You do what you have to do at the end of the day. I loved the idea BTW but my husband hated it!!

If you think about how many older houses have 'granny annexes' we will, in time, see many more of these on new builds. In fact the couple over the road from us live in a house with the garage converted into a house and the mum lives in that. She loves it, she has the house to herself but is also near her daughter.

We have too much crap. It is true. I am tripping over stuff all the time in this house because I've nowhere for it, I've a lot of stuff to go into theloft today. All of a sudden our need for a huge house is immense.

I've also got a friend who is married with a family and shares a house with her parents, they bought it together and share the downstairs and have a different side upstairs to each other - because they had lived in tied accomodation and could not afford a place of their own.

It IS already happening. In fact it started about 8 years ago and we are only just starting to see it due to forums like this. The savvy people live together - the silly ones are starting to feel it!

Sir_Humphrey

dgl1001 wrote: »

it is the people who can, who will sustain prices in the future. So for me (and i appreciate that everyone is different) there is a massive shortgage of housing.

No they would not, because if fewer people are in the market, demand falls. This is a component of demand destruction.

The rental market is far more efficient than that for buying, and that does not indicate higher prices as a result of a supply shortage, but rather overcrowding.

dgl1001

Sir_Humphrey wrote: »

The trouble with the supply argument is if there was a shortage of housing now, there was also one back in the mid-1990s. Nothing has happened to the underlying supply/demand situation to justify prices more than doubling since 1999.

If a shortage of housing is leading to price rises, why have rents been so static for the most part over the last 10 years? Indeed, rents have been falling in 2009 in the outer London area I have been looking at. The main reason why prices have increased to the extent they have is down to overly lax lending causing a housing bubble.

I do not deny that we need more housing in the UK, and that the fundamentals of supply/demand will always make UK housing more expensive than the USA or France. However, the question is the extent of the expense - prices could fall a lot more and still be more expensive than those countries with plenty of land and loose planning laws.

The shortage of housing manifests itself in overcrowding. If something cannot be afforded, people consume less of it. This is a process called demand destruction. The only reason demand destruction did not occur before the credit crunch was lax lending.

Rents have reamined static over the last 10 because of the growth of but to let - more properties were coming to the market which kept the rents static. Agree with your point about funding, but that is a function of demand - the supply function has also had a significant influence on prices

nitr02007

dgl1001 wrote: »

I think you make some very good and valid points about overcrowding and the price of housing generally. However, I think where I would dissgree agree with you is the housing shortage part. Every thing you talk about is becuase there is not a suitable supply of housing for everyone and while you may not be able to afford properties at this stage of your life, it is the people who can, who will sustain prices in the future. So for me (and i appreciate that everyone is different) there is a massive shortgage of housing.

The point of this thread - I thought - was to reinforce that house prices should rise as there aren't enough to meet demand. This however won't happen if most people cannot afford those prices. There is a demand for, and a shortage of, affordable housing. I'm at a loss to how Hamish thinks this will push house prices up - surely prices should fall to make them more affordable.

blue_monkey_2

dgl1001 wrote: »

I think you make some very good and valid points about overcrowding and the price of housing generally. However, I think where I would dissgree agree with you is the housing shortage part. Every thing you talk about is becuase there is not a suitable supply of housing for everyone and while you may not be able to afford properties at this stage of your life, it is the people who can, who will sustain prices in the future. So for me (and i appreciate that everyone is different) there is a massive shortgage of housing.

I see what you mean.

Yes there is a shortage of housing, for the people that can afford it. So this means there is a shortage of affordable homes.

While you say' this stage in my life' it is not going to change for a good number of year and I am not going to get a mortgage when I am 50. There are many more like me and my family. Things will not change until the price of housing becomes more realistic.

You might think that the bricks you are sitting in are worth 300k but if no-one has 300k you have to be realisic about it and think that it might be overpriced. Sure there will always be some people moving, selling, buying but not in the volumes that there was.

My mother dropped the price on her house 55k before it sold. What the EA said she could get for it and what the buyers wanted to pay were a totally different matter. Everyone offered around the same price. Strange that. However there are some people who will not relent on the prices - depsite them only paying 30k for it all those years ago. Their choice but this is what is causing the problems that there are today.

dgl1001

Sir_Humphrey wrote: »

No they would not, because if fewer people are in the market, demand fal. This is a component of demand destruction.

The rental market is far more efficient than that for buying, and that does not indicate higher prices as a result of a supply shortage, but rather overcrowding.

I do not agree that there would be a significant fall in demand. As we are already seeing, parents are already helping out theire children to secure funding for FTB'ers - this will only increase in the fututre, supported in part but the value of their homes rising.

Sir_Humphrey

dgl1001 wrote: »

Rents have reamined static over the last 10 because of the growth of but to let - more properties were coming to the market which kept the rents static.

That undermines the argument that a fundamental shortage of property is keeping prices high - rather than the ownership structure has changed.

dgl1001 wrote: »

Agree with your point about funding, but that is a function of demand - the supply function has also had a significant influence on prices

Supply has always been inelastic in housing - you cannot argue that there has been a housing shortage for over thirty years and then use that to justify a phenomenon of 2000-2007. There was a shortage of housing in the 1980s and 1990s but prices were much lower.

I would expect the fundamental supply not meeting fundamental demand to have had some impact - there are good fundamentals reasons why house prices have increased since the mid-1990s, but nothing to justify the extent of the rises. Even a fall from peak of 30% would leave prcies higher than the mid-1990s in real terms.

I get a bit sick of people with basic A level economcis spouting supply and demand as though they were the reincarnation of Adam Smith. What you learn at degree level is that the economics learnt at A level is either plain wrong, out of date or too simplistic. This is true of a lot of other A level subjects too.