Cable claimed that ‘serious housing inflationary pressures’ are developing in parts of the country, most notably in London and the south east.
His warnings about the dangers of the Help to Buy scheme, which aims to boost the UK’ housing market, has been repeated by influential business groups and the recently replaced Governor of the Bank of England George xxx who indicated that it risks driving up house prices when properties are already over valued.
Under its second phase, to be launched in January, the taxpayer would guarantee up to 15% of mortgages on homes worth up to £600,000.
‘We should certainly think about how it should come into effect, indeed whether it should come into effect, in the light of changing market conditions. We don't want a new housing bubble,’ Cable said.
Although he admitted that in many parts of the country it clearly isn't a problem such as Northern Ireland, Wales and the East Midlands. ‘But certainly in London and the South East, in the north east of Scotland, in other areas, there are serious housing inflationary pressures,’ he added in an interview with Sky News.
Sue Foxley, head of research at Cluttons, believes that the concerns are valid especially considering the potential impact of the scheme on London’s housing market. ‘Indeed, schemes such as Help to Buy and Funding for Lending have enabled a number of purchasers to get on the ladder. However, in highly restricted residential areas of the south east, an increase in mortgage availability in the absence of new supply can only result in price rises well ahead of earnings,’ she explained.
‘In parallel, the local planning politics in the Home Counties in particular are holding back residential development and this must be addressed. Yes, there is ongoing reform of the planning laws, but to date, there has been little sign of engagement and certainly inadequate delivery of new homes in those area most under pressure,’ she added.
There is increasing evidence that the Help to Buy scheme is set to boost house building across the UK which experts say is much needed to cope with the hundreds of thousands of new homes that are needed every year.
A snapshot of outline planning applications for 50 plus unit schemes since Help to Buy was announced across the UK shows that the number of private homes for which house builders, developers and land owners have sought permission has jumped by 30% compared to the same period last year. This is also true of detailed planning applications, which are submitted at a later stage that initial outline plans.
The latest official data showed a 33% jump in private home starts in the second quarter of this year, compared to the same period last year, although this rise was flattered by a very low level of starts between April and June last year.
Analysis of data from Glenigan and Barbour ABI, the leading construction information providers, undertaken by Knight Frank, indicates that the rise in activity could continue in the years to come.
Although achieving planning is not a foregone conclusion, the data indicates that activity is being stepped up, something which several of the major house builders have pledged to do.
An uplift in planning submissions has been seen in most parts of the country, with Scotland and the West Midlands leading the way. The number of private units for which outline planning has been submitted in these regions has risen by 253% and 187% respectively between May and the end of August, according to data from Glenigan. However the number has fallen in the East of England and the South West.
The regional picture for detailed planning submissions shows a different picture however. Data from Barbour ABI shows that there has been a 20% rise in the South West between April and July, indicating that plans for increased house building may be further advanced in this region.
‘We are continuing to see strong demand from the major house builders for development land. It is interesting to note that Help to Buy has made the market less polarised and South East focused. Instead there has been a real increase in appetite for land in the Midlands and the North, which suggests that the trend of rising development volumes will continue especially in areas where employment is strengthening and the population is forecast to keep rising,’ said David Fenton, head of Regional Land at Knight Frank.
‘Contrary to popular belief that house builders want to create land banks at present, they are driven by return on capital employed more than ever, so once they buy a site they will push to complete the units as soon as possible. This signals that the turnaround between planning consents and completions could be within months,’ he explained.
However, he added that it is worth noting that even with a 30% uplift in building, completions in the UK will still be far short of the 250,000 a year it is estimated is needed to meet the demands of a growing population.
