As property investors across the UK continue to try and make sense of the dire UK property market it has been revealed that in excess of 762,000 homes are currently empty across the country. These properties are a mixture of repossessed homes and properties which have been built but remain unsold due to the ever worsening property market. While the UK government has much to do at the moment in trying to refloat the UK economy the problem of what to do with these empty homes is a very tricky scenario.
There are a number of options open to the government which include :-
Acquiring empty homes for social housing
Social housing is an issue which has become more and more of a political hot potato with families across the UK losing their homes and looking towards the government for housing and assistance. A number of authorities around the world have decided to acquire substantial amounts of empty properties in order to prop up the local property market but the position of the UK governmental budget would appear to rule out any substantial acquisitions.
There is also the question of what price the government would expect to pay for such empty homes bearing in mind they would prefer to get the best value for taxpayers while also signalling to the wider property market that prices have bottomed out and there is value in the UK property market. Trying to find a balance between these two issues could be very tricky and will no doubt attract controversy which ever way the government decided to go.
Extra funding for housing associations
Housing associations, or shared ownership schemes, have been something of a pet project for the UK government over the last few years although how much assistance they can offer with regards to funding at the moment is debatable. In many ways allowing housing associations to pick up the slack in the UK property market will both take a significant number of properties off the market as well as allowing UK homeowners to benefit from the eventual recovery in the UK market.
In many ways this would be a perfect scenario apart from the fact that a significant number of homeowners have been left destitute after the repossession of their homes and could see a number of UK property investors make significant returns off their backs. There are moral as well as investment issues to consider but in reality there are no right and no wrong decisions to be made as these empty homes are simply wasting assets.
The general UK property market
While the figure of 762,000 homes remaining empty will shock a number of the UK population and property investors it is an issue which needs to be addressed sooner rather than later. If these homes remain unsold or unoccupied for a considerable amount of time there is every chance that when the property market recovery finally arrives they will be a major drag on prices. They will also impact upon the newbuild market which has been demolished over the last few months with tens of thousands of jobs lost.
The longer the newbuild sector remains flat the more pressure this place is on the UK benefit system and the UK economy as a whole. Quite how the government can solve this issue to the benefit of all parties involved remains to be seen but now that the figure is out in the open it will remain a focal point for some months to come.
Ideally it would be perfect if the UK banking industry was able to supply substantial mortgage finance to either housing associations, shared ownership schemes or first-time buyers as this would both benefit investors and the banking system as a whole. However, as we touched on with one of our earlier articles it would appear that the UK banking sector has a substantial exposure to the commercial property market which some experts forecast could cost them £70 billion in losses during 2009. This is highly likely to reduce the flow of mortgage finance across the UK and we are already seeing signs that it is significantly impacting upon house prices.
How can the property crisis be addressed?
The last few months have seen the UK housing market continue to fall sharply, something which began at the start of 2008. Despite a number of false dawns we have yet to see any significant bounce in property prices and demand is still very weak. However, there may be light at the end of the tunnel with regards to international property investors, the majority of whom have seen their local currencies increase substantially in strength against a very weak sterling.
When you consider that against the dollar alone sterling has lost around 30% over the last 12 months this is a serious devaluation and increases the spending power of international investors. The situation has been repeated across a number of major currencies around the world with the euro benefiting substantially from a weak sterling. Surprisingly we have yet to see any major overseas investment into the UK property market over the last few months although many believe it is just a matter of time if sterling remains around above current levels.
In many ways the UK property crisis has moved out of the hands of the UK authorities as they have ploughed literally billions upon billions of pounds into the sector with very little return. There is a feeling amongst observers and experts that a natural progression will see these issues and problems flow through and out of the UK property market which will then allow the sector to rebuild and investors to consider the UK property market again. Quite when this will happen is debatable with differing opinions across the board.
Conclusion
The UK property sector has been under pressure for some time now and the release of the 762,000 empty homes figure will shock many. However, in some ways it is better to know the situation than rely on speculation and inaccurate reporting which can have a detrimental effect. While the UK government have a number of options open to them it is uncertain which are applicable and even which are real alternatives.
In many ways the authorities have done all they can with interest rates set to fall further in the short term, pressure placed on banks to increase mortgage liquidity, tax incentives, mortgage relief schemes and a number of local initiatives all in place. In some ways the market will need to work through these problems in order to find a firm base from which to build for the future.