Annual mortgage lending is up 50 per cent since the last general election, but housing starts have only edged up 7 per cent, the Council of Mortgage Lenders has said, which the trade body said emphasises the supply imbalance at the heart of the market.
As voters go to the polls today, the mortgage market is showing significant signs of recovery since 2010. Lending last year totalled £204bn, 50 per cent higher than annual advances for the year before the last election, however housing supply is not expanding in response.
CML’s new and views, published today (7 May), shows that having grown by just 7 per cent to 60.4m in the 30 years to 2005, the UK’s population increased by another 8 per cent to 64.1m in just eight years to 2013.
However, housing starts had only increased 7 per cent from 139,000 in 2010 to 149,000 in 2013.
The financial crash in 2008 contributed “significantly” to the lack of responsiveness of construction rates to the growth in population, the CML says. It also partly explains the relatively modest growth in house prices across the UK as a whole during the last decade.
According to Nationwide, the average house price stood at £157,500 at the time of the 2005 election and had grown by just 7 per cent, to £168,700, by 2010.
Since then, it has risen by a further 12 per cent, to £188,600. But the rate of house price growth has varied considerably across the UK in recent years, with sharply higher prices in London in particular and much more subdued growth in much of the rest of the country.
CML adds: “Whichever party, or combination of parties, forms the next government will face major challenges in the housing sector. The challenges extend across tenures, and will have to be addressed by a government operating under significant fiscal constraints.
“As we said when publishing our manifesto last autumn, there is much that the mortgage market can and will do to promote a healthy housing market.
“This article shows that the challenges for policymakers evolve over time, but it will be important for the incoming government to implement a long-term, strategic policy for housing that is clear and deliverable.”
In its manifesto, the CML set out its views on the housing needs in this election for the young, older people and ‘in-betweeners’. Getting the supply side of the housing market sorted “once and for all” needs to be a key priority for the next government, the Council of Mortgage Lenders’ chairman said in April this year.
Moray McDonald said that the UK needs “a housing strategy that commands all-party support with a three-line whip from national government down to the parish council”. “Fix this, and the market itself will address affordability,” he said.