Nik Butler: Low incomes are keeping many people off the property ladder

A favourite phrases of my father is “Turkeys don’t vote for Thanksgiving”; to give the aphorism a more British spin we would say “Turkeys don’t vote for Christmas”.
By The Newsroom
Published 17th Jul 2014, 07:00 BST
JPCT 120314 S14110969x Nik Butler -photo by Steve Cobb SUS-141203-095917001JPCT 120314 S14110969x Nik Butler -photo by Steve Cobb SUS-141203-095917001
JPCT 120314 S14110969x Nik Butler -photo by Steve Cobb SUS-141203-095917001

When I read the views of landlords and property agents who talk about the need for “new housing” and the “terrible problem” of the housing shortage that particular saying always comes to mind.

Turkeys don’t vote for Christmas and letting agents are unlikely to vote for less housing stock for their clients to purchase in buy to let schemes. The problem however is not the lack of housing stock or sites but the lack of properly salaried work. The ongoing buy to let property grab of old and new houses makes ownership an unobtainable goal for first time buyers. The average deposit for a first time home is £27,000 and the average rent per month is over £1000. The most austere and frugal of living arrangements require a fairly robust salary to reach a credible savings goal for any deposit.

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Working against this are mindsets which dismiss the issue as laziness on the part of the buyers to cut spending. One suggestion “affordable housing” is promoted as a salve in the new development controversy.

Affordable housing relies upon the willing denial that house prices never rise; despite the consistent growth in average prices for the last forty years. A further conceit is that building more houses will reduce the value of existing property. This requires a certain wilful ignorance as to how markets work; or what overstocking means in a property market. Housing shelf life is not that of the supermarket; bricks and mortar have an exceedingly long sell by date. To reduce the price of houses you don’t build more of them. Instead you reappraise the risk of each loan; hence you create negative equity.

Those who expect new housing to reduce existing house prices might want to consider that Turkeys and Property managers wont vote to decrease the value of their stock. We should be asking “is there a housing shortage or a lack of well paid employment?”

It seems clear that new houses and the subsequent affordable homes will benefit the pockets of buy to let groups and lettings businesses. A better question to consider when looking at the arguments for development is whether these councillors and consultants involved in planning are likely to vote for, or against, Christmas.