UK housing market is dysfunctional, says CML economist
By Kevin Peachey Personal finance reporter
The UK housing market is “dysfunctional” and building more homes will fail to solve the problem on its own, a key industry figure has said.
Bob Pannell, chief economist of the Council of Mortgage Lenders (CML), said that activity in the market was “sluggish”.
In a blog, he argued that sales levels were the same as in the mid-1990s.
At that time, many people were facing negative equity and the stock of homes was much smaller, he said.
Reforming areas such as property tax would help, Mr Pannell said, alongside building more properties.
Credit crunch hangover
The CML is expecting more than 1.2 million housing transactions to be completed during the year.
Mr Pannell said that was slow, partly owing to a hangover from the credit crunch, but also the result of factors including:
An ageing population seeing older people remaining in larger homes
Landlords picking up a chunk of properties going onto the market instead of owner-occupiers
The gap between property prices and earnings getting wider
“Home ownership is becoming increasingly polarised – by such parameters as age and the tenure of parents,” he said.
In July, a report by accountants PwC suggested that more than half of the under 40s will be renting homes from private landlords in the UK in 10 years’ time.
It suggests house prices will rise at an average of 5% a year, pricing the typical home at £360,000 by 2020. Using PwC and industry data, that would equate to a homebuyer needing £64,800 in savings to pay a deposit to get on the property ladder in 2020.