Joint SPR and SPE Seminar: Prospects for the Housing Market: a building storm?
5th December, BNP Paribas, London

Successive governments have failed to hit housing targets, resulting in a 2.3 million home shortfall.

Speaking at a joint SP
R-SPE (Society of Professional Economists) seminar, Rebecca Shafran, senior associate director of alternatives research at BNP Paribas Real Estate explained how high construction and rising labour costs are limiting the development pipeline across the UK. In addition, 14% of existing stock is not fit for purpose and fails to meet a “decent” standard.

Rebecca went on to describe how the lack of supply is exacerbating the affordability crisis – fewer people under the age of 35 are able to own their own home than ever before with “Help to Buy” ending, combined with a weak economy, the cost of living crisis and high mortgage rates.

Paul Cheshire, Emeritus Professor of Economic Geography at the London School of Economics, said that the inelasticity around planning is at the root of the lack of supply and claimed the solution is to build on green belts. 
Paul explained how building on brownfield land was not the answer, as it is often in the wrong place and doesn’t have the required infrastructure to make the homes attractive and accessible. Green belts were put in place in the 1950’s and restrict development in places where it’s needed the most. The audience heard how green belts aren’t always so green - in fact the most common use of green belt in the UK is for intensive agriculture, which is not just bad environmentally but also destroys biodiversity.
 
In 1998, the median house price was four times the average annual salary, but this has now risen to seven and a half times and is even higher in London. This affordability issue and lack of housing creates social tensions.

Rebecca highlighted the current situation for real estate investors, stressing that transaction activity has been way down in 2023 and is expected to continue to be low in 2024. To entice buyers, sellers are offering an average 10% discount, the largest in five years according to Zoopla’s database.

Investors that are active are showing interest in student housing and senior living, both of which are supported by strong demographics. There is forecast to be a 620,000 shortfall in student beds by 2026 combined with strong growth in international students, particularly from the Middle East, Asia and Africa. With regards to senior living there is a 487,000 shortfall in accommodation combined with an ageing population, particularly in rural and peripheral areas.

Paul finished his presentation by claiming that unfortunately the outlook for UK housing is bad, and that planning for the sector has generally been abandoned. Only 33% of local authorities have a housing plan.

The event was chaired by Stephen Meredith, Senior Economic Adviser, Department for Levelling Up, Housing & Communities, and kindly hosted by BNP Paribas.

Alex Dunn