Investment Landlord Tips Opinion

What Housing Shortage?

David Rutland
Written by David Rutland

Scarcity drives price up – but that could be set to change.

Scarcity is the building block of most economic systems. The less of a product you have available, the more expensive it becomes.

We’ve been able to watch in action with all of the best commodities – oil, food, housing. The principle of supply and demand is fundamental, and it isn’t likely to disappear anytime soon.

How many of you bought a house 20 or so years ago – either as a home or as an investment property – and have been sitting back and watching is value double or triple every 10 years?

And rents have been increasing steadily too. Simply because demand is outstripping supply. As the government, newspapers, and other media pundits never grow tired of telling us, the UK is in the middle of a housing crisis.

More sensationalist papers tell us that migrants are entirely to blame. The root cause of the excessive demand only really matters if it goes away, because without the constant need for more and more housing, prices will stagnate or even drop.

And unfortunately, there’s a fairly good chance that it will.

If you were paying attention in November, you will have noticed Chancellor Philip Hammond making housing the one of the centrepieces of his budget. And in October, Theresa May pledged an extra £2 billion per year to furnish the country with 25,000 new council homes.

After taking care of the 4,100 rough sleepers in the UK, that leaves 20,000 new homes to be let out at a low rate to tenants who are currently renting privately. Your tenants maybe.

It’s not a huge number – it’s only around 0.5% of the total number of rented properties in the UK. But it’s increasing the supply, and eating away at demand.

And remember, these are only the Conservative proposals. It’s not altogether impossible that we’ll have a Labour government this time next year.

For private landlords, it could be a testing time as Jeremy Corbyn’s government plans to build at least 100,000 new homes, and force landowners to sell potential building plots for next to nothing, before undertaking, “the biggest council house building programme in at least 30 years.”

Even more supply, even less demand.  The scarcity which has helped drive up prices and rents could end up a fond and distant memory.

We shouldn’t even need to point this out, as a glut of private rental properties in the south east pushed rents down by 2.3% last year.

Looking abroad, we can see what housing oversupply is doing to rental incomes in Kenya.  In Kuala Lumpur. In Switzerland. Not even New York landlords escape unscathed.

In these places, it’s not even council houses with their guaranteed tenancies and low rents which are sounding the claggy chimes of doom for private landlords.

But it could well be here.

 

Image credit: Department for Business, Innovation and Skills

About the author

David Rutland

David Rutland

With a decades long career as a professional writer, David Rutland has worked as a journalist on local, national, and international newspapers, before embarking as a career as a freelancer.

He has ghostwritten several books, as well as producing travel guides, manuals, humour articles, and more internet blogs than you can shake a stick at.

David maintains offices in East London, but spends most of his time in a shed near Liverpool, where he writes, as well as developing apps for Android.

What people say about him:

Arrogant and abrasive - Alan Davis, Editor in Chief North Wales News Group

An absolute liability - Matt Simms, Editor, Vale advertiser

Are you sure this won't get us all arrested? - Mohana Prabhakar, Editor in Chief, Apex News Group

Go and have a shave. You're all prickly - Mrs Donna Rutland.

1 Comment

  • Are we really supposed to feel sorry for private landlords because there are plans to build more housing? I’m sorry but no, it’s about time that average working class people are able to afford a decent enough space to live in without having to pay astronomical rental prices. There are some of us who are really struggling to get by so please cut the pity party.

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