The Sunday Times: On the home front
Sun 22 Nov 2015
? Every month, the official statisticians publish two sets of inflation numbers: one for consumer prices, theother for house prices. The consumer price index, as you will have heard, paints a picture of an economy inwhich there is no inflation at all for the third time in 2015, we had deflation of 0.1%, and prices werefractionally down on a year earlier, largely because of falling energy and food costs.
The picture for house-price inflation was, however, very different. It ticked up from 5.5% to 6.1% and, if thesurveys are right, will go higher in the coming months.
In real inflation-adjusted terms, house prices have risen by 6.2% over the past year. In fact, with noinflation this year, and not much in 2014, house prices have risen by 15% in real terms over the past twoyears. Thats a chunky increase.
There was a time when it was thought that the only thing driving up property prices, particularly in theswankier parts of London, was the presence of foreign buyers with bulging wallets. No longer, it seems.
Marsh & Parsons estate agency says British buyers have been emboldened, while their overseas
counterparts are taking a back seat, driven away by the strength of the pound, higher stamp-duty bills andchanges both threatened and actual in non-dom status. In the July-September quarter, 79% of Londonsales were to domestic purchasers, 21% to foreigners. The latter figure is down from 25% in the past 12months.
? I think I may have performed a public service by encouraging submissions to the House of Lords economicaffairs committee and its investigation into the housing market. Some people have sent their submissionsdirect to the committee and copied them to me. Others have sent them to me, and most got through, despitea glitch last week in the email address at the end of the column, for which I apologise.If theres been a theme in the latest batch of submissions and some of them are too comprehensive to sumup easily it is that genuine homebuyers are being squeezed out by a range of forces. Some blame buy-to-Version: 1
let landlords, others the owners of second homes, and yet others absent foreign landlords, who buy propertiesin Britain for the capital appreciation, then leave themempty. Some say there should be restrictions on foreign ownership, as in countries such as Switzerland, aswell as the Channel Islands.
? This takes me into another strand: the impact of immigration on housing demand, raised by a number ofpeople. It remains the case that non-EU net migration is higher than migration from the rest of the EU 196,000 versus 183,000 in the latest 12 months but it is also the case that immigration is contributingsignificantly to population growth. The direct and indirect effects of immigration account for at least twothirdsof the growth in Britains population.
Will this always be the case? There was no net migration in the 1970s and 1980s, and not much until the late1990s. Whether current high levels of net migration upwards of 300,000 a year are the new norm is oneof the key issues for housing. The latest official population projections, which predict a rise from 64.6m lastyear to 74.3m in 25 years time, assume net migration of 250,000 a year over the next five years, slowing toabout 185,000 annually from 2020.
In the absence of new net migration, incidentally, the population would be 6m lower than that projected in aquarter of a century. Assuming that will happen would be naive. We have to prepare for a 10m rise in thepopulation over the next 25 years. Even if it doesnt happen, I doubt well end up with a housing glut.