predicted that a Britain outside the EU would result in a 10%-18% fall in house prices. This can be explained by a fall in investor confidence in the UK’s future causing a fall in foreign demand for housing and a reduction in the price level. Since the referendum, the pound sterling depreciated by nearly 12% on the USD, showing that demand for UK goods has already reduced with uncertainty over the economic future of Britain. This depreciation in the pound will cause a fall in house prices and should help reduce our trade deficit. However, doing so will lead to a rise in inflation. Although our current inflation level is well below target, a large increase in the rate of inflation will see the Bank of England increase interest rates which, in turn, will raise the cost of mortgages. This will essentially mean the overall cost of a house will remain expensive. So, what is the future of the UK housing market and what is the solution to affordable housing? Well, despite recent evidence showing that the room to population ratio is at its highest ever (suggesting that the elder generations are holding onto big houses and not occupying all rooms), demand is currently outstripping supply. Many believe that relaxing development regulations and subsidising the building of more houses would ease the issue. The next step seems to be the expansion of building on “brown field” sites and many campaigned for construction on green belts, but these brought unintended consequences of increased house prices when introduced. Some argue that the green belts don’t necessarily consist of the picturesque green land we imagine. And that, if we were to allow construction on what makes up 13% of English land, this increase in supply would help to meet housing demands. Another way to satisfy demand via implementation of supply-side policies would be to increase government spending and invest in building more houses in London. Indeed, Sadiq Khan hopes to increase the rate of house building in London to 50,000 a year. It seems logical to build more public housing to meet demand, but, with the current government austerity plan, it’s improbable that the government will be willing to spend large sums of money to meet the necessary supply of housing, especially if we see a conservative government for the next 10 years. Of course, from another perspective, those who campaigned to leave the EU argue that the rate of migration to London and the UK as a whole puts too much pressure on public services and housing. And that the future fall in demand as a result of potentially less migration will decrease prices. However, it doubted whether immigration levels will fall significantly, especially with migration from outside Europe making up more than half of total migration to Britain. In conclusion, it’s evident that ever-growing unaffordable house prices in London will have a considerable negative impact on the next generation’s wealth, along with proliferating occupational immobility and forced movement away from London. However, with the departure from the EU and future potential solutions, such as those of the new Mayor of London’s to reduce house prices, perhaps the future of housing isn’t as bleak as it first seems.
__________________________________________________________________________________________
43
Made with FlippingBook Annual report