National Housing Federation predicts housing crisis in 2020

National Housing Federation predicts housing crisis in 2020

National Housing Federation predicts housing crisis in 2020

The National Housing Federation (NHF) has today issued a damning report regarding the UK property market suggesting that a 22% increase in birth rates between 2001 and 2011 will lead to a significant shortage of property by 2020. Indeed official figures suggest that 6.9 million people were born during the decade 2001 to 2011 yet only 1.6 million new homes materialised over the same period.

What does this mean for the UK housing market and how will first time buyers be impacted by 2020?

Shortage of housing

It is no surprise to learn that governments around the world continue to manipulate property demand and property development figures. There has always been a bias towards keeping demand higher than supply as a means of maintaining forward momentum for the market and leaving space “to fill” in the future. This buffer has grown over the last 20 years or so and the National Housing Federation believes that house prices will increase by 42% up to 2020 and rents over the same period will increase by 44%.

This is a damning indictment of the UK housing market and how successive governments have attempted to and managed to manipulate the marketplace.

Quote from : “The beauty of home improvements is that they are relevant when property markets are rising and they are just as relevant when property markets are falling.”

What does this mean for first-time buyers?

As a result of not only the expected increase in property prices but also the increase in rental demand, 3.7 million young people will be living with their parents by 2020. When you bear in mind that the long term trend in the property market after 2020 will be likely be upwards, we could see a whole generation lost to the housing market.

At this moment in time the average property is valued at nearly 10 times the average wage of a young person first-time buyer. While this in itself is a relatively high figure, the NHF believes that the figure could reach 16 times the average wage of a young person first-time buyer by 2020. These are the type of figures which will mean that more and more first-time buyers will not be able to arrange finance and will ultimately be left living with their parents for many years.

Did we not learn with the baby boomers?

Looking back on the UK economy in particular, the 1980s was a period where economic growth was strong and stock markets around the world pushed along to heady highs prior to the 1987 crash. While the situation today is potentially worse than the 1980s, and the creation of the baby boomers who would become property owners in years to come, governments at the time also failed to learn the lesson.

The problem is that while property prices do fall during recession they will only fall so far, and often bounce back very quickly, because of the untapped demand which is the buffer between supply and demand for property. In many ways the government of today has left it far too late to increase the number of new properties although a number of law changes may well assist the long-term trend more in favour of property development as opposed to demand.

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