It seems unlikely that the UK will ever be able to build enough homes to make property affordable. There is some speculation that we could have a house price crash, this would realign the market and make it more possible for first-time buyers to get a foot on the property ladder.
According to research carried out by the University of Reading, the policy to improve property affordability currently focuses on increasing the supply of properties. The best chance for first time buyers getting onto the property ladder lies in a house price crash, which is becoming increasingly likely due to the contrast between house prices and earnings. The research states that for housing affordability to stabilise, housing stock needs to grow at the same rate as real household income, but it seems this is impossible to achieve. The UK will need to build at least 250,000 new homes per year to keep up with demand, but the rate at which properties are built has remained significantly below this level.
The report from the University of Reading said that in order to improve affordability, the increases in house supply would need to be major and long lasting, and the change would need to be much larger than has ever been experienced before on a permanent basis. However, as affordability becomes increasingly stretched, even modest shocks to the economy could cause a house price crash. The prediction is good news for first time buyers who are struggling to get onto the housing ladder, but while a crash may help them buy their first home, they are likely to suffer a fall in the value of their home when the next house price downturn occurs. “Market crashes are hardly an optimal policy response to improving affordability, given the wider effects on the economy”.
The government’s recent housing White Paper made the importance of boosting housing supply clear. With measures set out to accelerate the process of home building and create high-density developments in towns and cities. Other government initiatives are aimed at helping make housing more affordable for first time buyers, using the Help to Buy and Starter Homes schemes. Assistance has also been offered to people saving for a deposit through a Help to Buy ISA; under which it will boost the savings of people buying their first home by 25% up to a max of £3,000.