Housing

Sometimes in life the biggest risk you can take is to play it safe. This is the predicament of Philip Hammond as he approaches the Budget next month. If he adopts a safety-first approach, it will almost certainly go wrong and he’ll be forced into a credibility-draining U-turn, as he was in March. His best hope is to be bold, and to hope this generates enough momentum to carry him over any bumps in the road. The two longest-serving chancellors of recent times have relished the theatrics of Budget Day. Both Gordon Brown and George Osborne loved pulling a rabbit out of the hat at the last minute, wrongfooting the opposition and grabbing the headlines. Hammond isn’t like that.

With the next European Council not scheduled until December, political attention now turns to next month’s Budget. As I say in The Sun this morning, there are signs that the government is getting to the right place on housing. I understand that when Cabinet discussed the Budget this week, a frequent refrain from ministers was the need to be bold on housing. One ally of the Chancellor tells me, ‘Housing will be the big centrepiece of it’. I understand from government sources that the Budget is likely to back both land release and the government directly commissioning houses. This means the government would free up public sector land and then get housebuilders to build thousands of homes on it.

The Conservative Party conference kicked off with news that the government plans to earmark an additional £10 billion for the Help to Buy scheme to support 135,000 home buyers. Theresa May’s extension to David Cameron’s flagship housing policy, which has helped over 320,000 buyers since its launch in 2013, is part of a raft of eye-catching measures to win over voters under 45 who deserted the Conservatives in the last election. With house prices now almost eight times the average income and many struggling to afford a home, housing has become a critical political issue. The increase in cash is a clear attempt to appeal to the young hoping to get on the housing ladder. But is this short-term measure enough to fix the broken housing market?

Housing – and specifically the dearth of reasonably priced housing – is an issue that crops up again and again in the political conversation. Young people are being priced out of the housing market; even where new housing is being built, very little of it could be classed as ‘affordable’. So today’s news that the average house price is now eight times the average wage will, probably come as little surprise. House prices have been increasing exponentially over the last few decades; in 2000, the average house was 3.96 times the average income, and even since 2007 the average house price has increased by 19%. The fact that it isn’t a surprise doesn’t mean that it isn’t something we should be concerned about, however.

Financial crises tend to see asset prices collapsing, making housing more affordable. But it’s been different this time because the authorities in the UK, and elsewhere, countered the crisis with low interest rates and quantitative easing. By slashing the cost of borrowing and flooding the system with liquidity, these policies set out to - and succeeded in - inflating asset prices. So we have seen the UK stock market and housing market rising at roughly the same amount in the last ten years. Taken together with weak wage growth, the result is that housing in the UK (as in many other countries) has become less affordable. So what has been the result of these post-crash policies? How overvalued is UK housing - and how does it compare to house prices elsewhere?

Those images from the early hours of Wednesday – fire shooting up the side of a tower block, with desperate people trapped inside it – were what I have been fearing for seven years. In 2010, I spent six months working on a BBC investigation into concerns about fire safety in refurbished high rises. Our findings were conclusive. Fire chiefs and safety experts all agreed that the vogue for cladding old concrete blocks with plastic fascia, removing asbestos and replacing steel window frames with ones made of UPvC cancelled out all the fire prevention measures that had been built into the blocks. In their original form, tower blocks are stacks of concrete boxes, insulated from each other.

As we ready ourselves for what has become an annual pilgrimage to the polling booths, in terms of finance there is little doubt that housing is taking centre stage in this election. This was not always the case. It’s true that if you look back to newspaper coverage of the housing crisis in the late 1940s and 1950s, post-World War Two, some of the articles could be reproduced word for word in tomorrow’s nationals. But in the 1980s and 90s, back when the structural undersupply of new homes was just getting truly entrenched, housing didn’t seem quite so important. This is one of the reasons why it is escalating back up the agenda now, with Jeremy Corbyn announcing on the campaign trail that housing was his top priority.

'It feels like 2010,' was the verdict last week of one seasoned operator in the prime London property market. What they meant is that after a period of uncertainty and restraint, the smart money is beginning to take a longer, harder look at the top-end of the London market. In 2010, the market was coming to terms with impact from the global financial crisis. In recent years, pricing has been adjusting to higher taxation, a political by-product of the downturn designed to address wider affordability concerns. However the stamp duty increase of December 2014 for £1 million-plus properties, which had the single biggest dampening effect on demand, is nearly two and a half years old. Or about the same age as the financial crisis was at the start of 2010.

It brings a whole new meaning to 'working from home'. New research has revealed that homeowners in one in three UK local authorities 'earn' more from their properties than going to work. I don't know whether to be thrilled or depressed by this news. Although given I live north of Manchester and (not surprisingly) more than nine out of ten areas where house prices are outpacing earnings are in London, the South East, South West and the East of England, I'm veering towards the 'crying on the inside' option. A closer look at the data from Halifax also shows that London boroughs dominate the top ten list of locations. The biggest gap between rising property values and earnings was in Haringey.

Dinner table conversations these days prove that you don’t have to be an estate agent or work in the property industry to have a view on the UK housing market. Just a look at the headlines and stories on housing which appear in the media every week is further proof of the country’s interest in all things bricks and mortar. But in the media it’s more likely to be agents or industry specialists giving their view, rather than homeowners or renters in specific parts of the country. Yet the sentiment of homeowners and renters plays an important role when it comes to the housing market - not least in determining decisions about whether to buy or sell a home, whether to upsize, downsize or just move to a different area.

You’ve traded in your beat-up turkey of a car. You’ve forked out on insurance, finance, the MOT, and what you think are tasteful new rims. Next thing you know, you’re being summoned to court. The tricked-out wheels were a step too far. The car-maker is suing you for messing with their product. The fluffy dice in the rear view are also a problem. If you lose in court, it’s goodbye to your gleaming saloon – dice and all. 'Get off it mate. It’s your car. You paid for it. We don’t live in some preposterous ownership dystopia,' I hear you say. After all, if this were true, there would be protest and peaceful liberal chest-beating to the hymn of the Magna Carta. Fortunately, such partisan rules do not affect our daily affairs.