Your Starter (Home) For £450K
18 January 2016
A Government announcement, from minister Gavin Barwell, that the intention is to build “thousands” of starter homes for first-time buyers this year is something that should obviously be welcomed. And what’s more, the assertion is that these will be discounted and notionally “affordable”. They will be built on brownfield sites in 30 local authorities across the country.
But, aside from the Government not being able to say how many of these homes will be delivered – so giving us no sense of how they’ll mitigate the apparent need for 200,000 new homes p.a.; an almighty row has flared up as to the definition – real or perceived – of “affordable”.
The new homes will be sold at a discount from market values of at least 20%. That means a cap of £250,000 outside London – yet a ceiling of an eye-popping £450,000 in the smoke. Now it doesn’t matter whether you would think such a starter home is affordable or not, the Government will still count them towards its total of 400,000 affordable homes.
And here in the real world, some claim – as we related in Homes Fit for Hipsters recently – that ‘middle-income’ could be defined as around £90K p.a. Not many first-time buyers on that we’ll wager.
In London, it would require a mortgage multiplier – after the average first-time buyer deposit of 17% – of over four for a singleton on that money to realise that. The average UK wage is currently slated at £26,500 so even a couple would need a multiplier – after 17% down – of a whopping seven. Doesn’t seem likely, does it?
Outside London, where the cap applies, that same couple will still need to borrow around 3.7 times their combined salaries: a multiplier not available to all, especially the young; and at the edge of affordability for many anyway.
It’s unlikely that the British obsession with property ownership will end any time soon. While there is some shift towards long-term renting – not always through choice – it still seems that a cultural change towards the German, for example, attitude where house-buying is often delayed until after the nest is empty is beyond us. And if we could build the number of rental properties needed to meet that demand, we could probably build the houses to buy as well.
Rampant wage-inflation to reduce the proportionate cost of housing to individuals is plainly not desirable; and – in very short order – would presage a price hike bound to restore the crazy ratio anyway.
So, ultimately, it is only supply on parity with – even outstripping – demand that will reduce prices in a meaningful, organic way that will re-activate the property ladder from top to bottom; and not from just two or three rungs up.
In the UK – building skills shortages aside – that is always a function of land: whether in the hands of land banks, housebuilders, local authorities, the MoD, NHS, agriculture and others. Until some tough choices are made about densities, greenfield and greenbelt development, ‘use it or lose it’ planning constraints, CPOs in city centres or even re-empowering the social sector; the reality is that we – and Government – are just tinkering.
So Mr Barwell: back to the drawing board for you please.