British house prices have hit record highs. The latest figures from Nationwide, say they are growing at an annual rate of 3.7%, the fastest rate for two years. The Halifax says that after five months of rises, the average cost of a UK property is now £298,083.
Is this reason to celebrate? It is not. Increasingly unaffordable prices are a sign of the abject failure of our property market, just about the most expensive and dysfunctional in Europe.
UK house prices may be going up, but home ownership is falling. In the 17 years to 2021, according to data from the Home Builders Federation, it dropped from 72% to 65% as the ever-increasing price of property far outstripped wage rises. Yet in many other European countries home ownership is still increasing, in Italy by 5.8% to 73.7%, in the Netherlands by a massive 14.7% to 70%.
Ever-higher house prices mean British people spend an “exceptionally high proportion of their post-tax income” on housing. Over 11 million of us spend more than 40% of our wages on where we live, the second highest level in Europe and getting worse every year.
We also have the oldest housing stock in Europe, with 78% of it built before 1980. The European average is 61%. As a result, we also have the highest proportion of substandard homes in Europe, with 15% failing to meet the government’s Decent Homes Standard. Such homes are more expensive to heat and maintain, one reason why our energy bills are among the largest in Europe.
We also have far fewer new homes than elsewhere as we have consistently failed to build enough. Only 7% of all UK properties have been built since the turn of the millennium; in France the figure is over 10%, in Spain over 18% and even in Greece it is 15%.
It therefore comes as no surprise that we have one of the smallest number of dwellings per head of population in Europe. There are just 434 dwellings for every 1,000 people in England. In France there are 590, in Italy 587 and in Belgium 483. This makes it far more difficult for people to find property and means that the rental market is a mess too.
Rightmove calculates that there are 20 applicants for every rental property that comes on the market. London is the most expensive European capital city to rent in; the cost of renting a one-bedroomed flat in London is 33.3% higher than in Paris, 41% higher than Berlin and 65% higher than Brussels.
The UK also has the lowest number of vacant properties of all OECD countries, making it the most difficult place of all developed nations to find a new home.
It is almost impossible to find any data about the UK’s housing market which is not embarrassingly dreadful in comparison with our neighbours. But what can we do about it?
For a start, we must do what they do and build. Last year, the UK began the construction of just 2.19 new homes for every 1,000 citizens, Ireland started 6.2, France 4.2 and Germany 3. So, a doubling or trebling of home construction each year, every year is the bare minimum that is needed.
The new Labour government is committed to building 1.5 million homes during this parliament but not many people think it can hit that target. The Centre for Cities think tank believes that radical reform of the planning system is needed or Labour will fail, it calculates it will miss its target by 388,000 even if the private home building sector builds at the fastest rate it has achieved in the last 80 years.
It is calling for a radical new “zoning” policy, as is found in many other European countries, where areas of potential house building are identified with a presumption that planning permission will be automatically granted. There will also have to be more building on green belt sites.
The private sector has proved incapable of building enough homes to meet demand, so the government has also sensibly reined in the Right to Buy legislation that has created such disastrous consequences. Council house building has almost died out since the 1980s – they weren’t allowed to use receipts from sales to build more homes, and why bother anyway when they were being forced to give the homes away for less than they were worth?
Council house building needs to soar to the levels seen in the 1950s, when local authorities built 125,000 a year on average. Harold Macmillan made his name by building 350,000 in one year alone, but last year councils built just 3,000. Even that was the best year in decades – in 2008 they built just 180.
Revitalising council house building should in theory be quite easy. Councils own lots of land and can grant themselves planning permission. All they need is an incentive, which the new government has helped with by limiting the discounts for those buying their own homes and the money to get started, hopefully from right-to-buy sales.
Another much-needed reform is to end the constant messing around with stamp duty levels, the current rise in house prices is being spurred by the end of tax breaks for first-time buyers early next year. Help to buy, mortgage subsidies, stamp duty holidays and all the rest do nothing to encourage house building and just hike house prices further, so are of benefit to sellers and not the desperate buyers.
Finally, we need to learn from best practice on the continent and reform the rental sector. Labour is making a start by abolishing “no-fault” evictions, tightening standards for maintenance and repairs and discrimination against those on benefits or with children will be banned. What is really needed is a German-style system, where longer tenancies and strict government limits on rent increases give much more power and security to tenants.
Yet the key factor that means lower house prices, lower rents, more choice, more security, better housing, warmer homes, lower bills, and more money left over at the end of the month, is much more house building. Build, baby, build.
