The price of houses in the UK will remain high because a “structural decline” means fewer homes are being sold and let, thus fuelling an excess of demand over supply.
That is the view of Barclays analyst Jon Bell, whose note to investors claims that UK home sales reached a high in 1989 but, since then, have been trending downwards.
The consequence, Bell argues, is that there are fewer homes on the market at any one time, and that restricted supply keeps prices high as well as pushing some demand into the private rental market - and thus keeping rents high, too.
Bell gives a string of reasons why the number of homes on sale is reduced compared to the past - and thus why homes are stubbornly high priced:
- Buy to let investors sell their houses less frequently than owner occupiers, thus taking their property out of the sales loop;
- Help to Buy has the same effect, by allowing people to buy bigger homes than they may need at that time - so not requiring a move when, say, their family expands;
- Stamp duty costs;
- A severe drought of council houses and apartments;
- An ageing population, consisting of individuals less likely to move than when they were younger;
- High levels of personal debt, which restrict people’s ability to secure mortgages.
Bell claims that the end result is that home ownership in England has declined from 71 per cent in 2004 to 64 per cent in 2015.