It might not strike you as an immediate problem for many investors or property owners, or landlords, however, it’s something that’s certainly going to affect the market in the years to come.
At the core of the market is a question of supply and demand. Simply speaking, the amount of supply will almost always dictate the price of something. Natural gas and petrol for your car? Just look at the price increases as soon as there was scarcity.
What if there wasn’t a sudden drop in supply with a huge surge in demand, but something similar going on over years, say, in this example, property?
It’s prominent in the sense that many people are aware of the issue, but it’s gone unnoticed in the same way that the fuel or heating crisis has because it’s happened so slowly. Over time the people looking to buy the asset has increased as the number of assets has stayed largely flat.
So, if you’ve invested in property or you’re looking to invest, is that likely to change in the future?
Government targets
In all honesty, no it’s not. Despite every single politician with a pulse in the UK wandering around a house building project with a hard hat on, the truth is that houses are not going up quick enough in this country – not even nearly.
The causes are many, and you’ll probably be aware of issues getting planning permission, as well as larger developers hoarding land and not developing on it, waiting for it to increase in price instead.
Reporting for the BBC, the government has apparently suspended its target for house building. The report said “The government is pausing its controversial planning reforms in England amid an angry backlash from Conservative MPs, government sources have told the BBC.
Michael Gove – who was given the role of housing secretary on Wednesday – is said to want to address MPs’ concerns. The government has pledged to build 300,000 new homes a year and ministers had insisted the planning rules needed a radical shake-up to ensure more homes could be delivered.
Under their proposals, the current system – where local planning officials assess applications case-by-case – would be replaced with new rules based on zones.”
For investors
It might seem obvious, but the government abandoning pledges to build the homes that people need is pretty disastrous for anybody wanting to afford a home.
That being said, it also more or less guarantees that house prices will continue to increase and that renters as a proportion of the market will also continue to follow suite.
As an investor, it creates an opportunity to increase your portfolio or to start one. There are never any iron clad guarantees about an increase in property prices as they’re also dependent on a strong economy, and a crisis like 2008 could quite easily once again drop the market.
The likelihood of that happening, however, remains reassuringly low.