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LONDON (Jan 11): Young Britons are being forced to forget a decades-old hope of home ownership, and new government measures won't give many the chance to buy their first home this year or further in the future.
Britain is unlikely to shake off its housing hangover anytime soon. Prices and transactions are on hold as the country mourns its housing boom, which inflated economic growth — prompting the government to vow to get Britain building again.
Government proposals, which include a mortgage indemnity scheme to support 100,000 new home loans, are tinkering around the edges, though. They fail to address some of the complex issues the country is facing in terms of housing.
"It's very hard to see that the kinds of measures proposed to date through the housing strategy will reboot the market," said Peter Williams, chairman of housing consultancy Acadametrics. "The government policy review is obviously earnest and worthwhile but it is striking to have a strategy without any clear aims and objectives or plan; it's a series of measures."
Economic uncertainty, the threat of a renewed recession and rising unemployment are cutting deep in terms of confidence, tipping consumer morale to its lowest level in almost three years.
A decimated mortgage market in the wake of the financial crisis has left first-time buyers constrained by high deposit requirements. Pressured banks show few signs of easing lending criteria as they repair their balance sheets and work to meet new capital regulations.
The number of first-time buyers in Britain fell 7% last year from 2010 according to mortgage lender Halifax, the lowest annual total since its records began in 1974.
Without the motor of those taking their first step on the housing ladder, transactions have fallen to record lows and fewer homes are now being built in Britain than at any time since the 1920s, leaving the country struggling to meet the needs of a growing population.
Prices in some areas, such as southeast England, have fared better than many feared, propped up by low interest rates. A modest overall fall is expected this year, but that could prove optimistic should the eurozone sovereign-debt crisis worsen significantly, a poll of analysts found.
However, homeowners have still seen a fifth sliced off the value of their property since the height of the boom four years ago, compared with a third in the United States.
Some economists and politicians are not opposed to a slowly deflating market, after average house prices tripled during a property boom in the 10 years to 2007 and a property bubble that many denied even existed.
The collapse of the mortgage market has set it apart from previous downturns, industry observers say. This is pushing Britain towards a lower rate of owner occupation and a bigger rental sector.
In other parts of Europe where renting a home is seen as normal even by many on higher incomes, this might not appear a problem, but in a nation used to home ownership may pose risks to the government in the long term.
Some construction-industry executives argue that a seismic shift in the housing market is unlikely, because of the history of home ownership, and a probable return to life of the mortgage sector via new entrants and increased competition.
However, a chief executive of a builder and developer in London said cuts to the government's affordable-homes budget as part of its austerity drive, and constraints for first-time buyers, were creating unease.
"If I was responsible for the whole of the UK market, I would be nervous now about what we're going to do about first-time buyers."
One 30-year old youth worker describes the frustrations of buying a first home with her partner.
"Not only are we going to be in debt to the bank, we're also in debt to our parents. We're probably never going to afford to get married, and god forbid we ever decide to have a child," said Jade Heppenstall. With both sets of parents lending money to enable the couple to meet the deposit requirements, Heppenstall is one of the lucky few. Nonetheless, she is part of a growing generation that is questioning how a university education and nearly a decade of work can lead to so little. "How the hell has this happened?" she said.
The Conservative-led government has proposed to reform planning laws to help unblock the flow of new homes being built, but has met resistance from supporters reluctant to see new homes in the leafy areas in which many of them live.
It has prevented sales drying up altogether for homebuilders in the first-time-buyer market with its equity-loan scheme, First Buy.
But the lack of a government road map and support for the growth of the private rented sector — which is being used to meet housing demand — is sustaining Britons' obsession with home ownership.
The government has pledged to reinvigorate former prime minister Margaret Thatcher's "right to buy" scheme of the 1980s — which sold off many state-owned rental properties — and tenants still lack many rights, especially compared to those in continental Europe.
"Much more is required to overcome the underdevelopment of professionally managed, custom-built rented housing," said Jennet Siebrits, head of residential research at CBRE.
Bringing in new money from institutional investors has long been mooted in the house-building industry as a solution to the housing crisis, with pension funds in particular attracted to the steady rental yields.
The cash-strapped government confirmed plans at the end of last year to tap British pension funds to provide the bulk of up to £30 billion (RM145.82 billion) of investment in 500 infrastructure projects.
The pressure on government from dissatisfied young people and the social issues related to an undersupply of homes, particularly affordable homes, will only grow.
Rental yields have soared 10% in the past two to three years, and local governments are under mounting pressure to come up with social-housing solutions.
"Tragically, housing is at the core of virtually every major issue we're facing in the town," said Jonathan Brash, a local councillor for the Labour Party in Hartlepool in England's northeast. "If you decide to squeeze the amount of money in young people's pockets, at the same time as not really investing in any new build and making it impossible for councils to bring empty properties back into use, the only direction is disaster for young people.
"Whether the government listens to any of that, I don't know. There is no evidence so far." — Reuters
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