UK population growth adds to property market pressure
Official statistics from the UK authorities today confirmed that Britain has the fastest-growing population in Europe with a net increase of 419,900 between 2011 and 2012. The office for National statistics confirmed the 0.7% jump in the population to 63.7 million amid concerns that growing pressure on the UK property market is set to continue in the short to medium term.
There are many factors coming together to squeeze the UK property market higher and higher and while the Bank of England yesterday suggested it was “comfortable” with recent house price rises, there will be some focus on the increase in the population. When you also take into account that the average UK house price recently broke the £200,000 barrier for the first time in three years perhaps we should begin to take notice of this build-up of pressure?
What is fuelling the population rise?
While there is no doubt that immigration is playing a role in the ever increasing UK population, now the third largest in Europe behind Germany and France, there has been something of a baby boom during the ongoing difficult economic times. In the year to June 2012 they were over 800,000 births in the UK which is the highest figure since 1972. Interestingly, while only 17% had a foreign mother back in 2003, this figure has now increased to 25.9% which reflects the multicultural society of the UK today.
One area of the UK property market which is often overlooked is social housing supplied by local authorities. As more and more immigrants look to move to the UK, with various European partners becoming eligible for free travel within Europe, this will place enormous pressure on local councils. At a time when the UK government is trying to reduce excessive spending and looking to cut the general budget it is proving difficult to finance social housing needs –much of this pressure on housing is now being taken up by the private rental market, placing yet more upward pressure on prices.
Quote from PropertyForum.com : “At a time when many experts across the UK property sector are highlighting the potential risk of a housing price bubble in certain areas of the country, Mark Carney, the Governor of the Bank of England, has joined the conversation.”
Has the UK government lost control of the property sector?
In the short to medium term the government would probably like to see UK base rates increase but bearing in mind the fragile economic situation this is unlikely before the next general election at the earliest. While there are long term plans to increase social housing and affordable housing across the UK, to assist the growing population, we are seeing more people looking to the private sector for rented accommodation. Housing benefits assist with this particular path and while the UK government is looking to reduce the housing benefit budget it seems that while individual payments may fall in the short to medium term, overall housing benefit payments are likely to rise for some time to come.
It would be wrong to suggest that the UK government has lost control of the property sector because at this moment in time an emerging property house bubble seems to be of little concern to the authorities. There are ways and means of strangling finance for the property sector, perhaps a repeal of the Help to Buy scheme would be one last resort, but at this moment in time the authorities seem happy to allow the UK property sector to find its own level.
Conclusion
There are a number of factors coming into play which are pushing UK property prices back towards record highs. Firstly we have relatively cheap finance available, government incentive schemes such as Help to Buy are starting to kick in, excessive demand compared to housing stock supply and perhaps more surprisingly at this point of the economic cycle, a growing confidence in the UK economy which is filtering through to the UK property market – not to mention the growing population.
There are some major challenges ahead for the UK authorities with regards to social housing and affordable housing in the short to medium term. The UK population is now approaching that of France and could very soon be the second largest in Europe behind Germany. This is a phenomenal statistic when you bear in mind the relatively small land mass available to the UK compared to its European partners. Property and land will become scarce in the future which has the potential to push land and house prices to uncomfortable levels.