Tuesday, 20 February 2018
No housing shortage in Britain?
It seems to be fashionable to argue that high house prices in the UK are not down to a shortage of houses. A quick read thru those sort of arguments normally reveals some nonsense thinking. This article is typical. It’s by Ian Hulheirn, Director of Consulting at Oxford Economics and former HM Treasury economist. (Article title: "Part I: Is there really a housing shortage".
His first argument is that because there are 5% more houses than households now as compared 3% 25 years ago that therefor there is no housing shortage.
Well now real incomes have increased during that period which can reasonably be expected to result in households demanding LARGER houses, and in more people demanding second homes. Plus there are more single person households than 25 years ago, and single people tend to demand more square meters of housing that the typical husband, wife and two kids household.
In short, it is reasonable to assume demand has risen. As to supply, the average value of land with planning permission to build on is £6million per hectare according to this source. That compares to around £20,000 for land without planning permission. If that doesn’t indicate an artificial shortage of land to build on, then what does?