I was at a property conference the other day, when somebody close to government was offering reassurance. His central point was that Boris Johnson’s government is stuffed with the kind of people who understand the housing market. There were, he said, five ministers whose brief used to be housing in the cabinet.
They include Sajid Javid, the chancellor, on whose watch as housing and communities secretary, Theresa May’s government produced the “broken housing market” white paper.
It is a point of view. Some would say that having a cabinet stuffed full of former housing ministers merely reflects that the fact that this has been a revolving door for ambitious politicians for as long as most of us can remember. Barely have they begun to master the brief, then they are moved elsewhere.
One day, perhaps, we will have a housing minister who stays in the job for a few years.
We await meaningful housing reforms from this government, perhaps because it has eyes on other things. All departments have, however, been asked to come up with eye-catching ideas in time for the forthcoming Tory conference.
The message is clear
When we eventually get an Autumn Budget, it will be interesting to see whether Mr Johnson’s Tory leadership plans for Stamp Duty, scrapping it on purchases of up to £500,000 and reducing the top rate from 12 per cent to 7 per cent, make it. Mr Javid has already ruled out shifting the burden of the tax from buyers to sellers.
In the meantime, the message from the market is that it is languishing. Rightmove’s monthly house price index has to be treated with a little more caution than other measures, because it’s based on asking prices, and these can be volatile and seasonal. But the message from its latest survey is a downbeat one.
Normally, almost as regular as clockwork, there is a rise in asking prices in September, ahead of the autumn buying season. Not this year, however. Asking prices in September were down by 0.2 per cent, the first September fall for nine years, leading Miles Shipside of Rightmove to fear that, as far as the housing market is concerned, autumn may have been postponed this year.
Mr Shipside explained: “As we approach yet another Brexit deadline, there are signs that the increasing gnashing of teeth is causing some to hesitate,” he said. “The autumn bounce normally kicks off at the same time as kids go back to school, but this year, it’s a late starter at best.”
A deflating housing market
House prices convey a message, and that message is that the air has been going out of the housing market over the past three to four years. There are several reasons for that, but they include, very obviously, first Brexit and secondly, the government’s tax and regulatory assault on buy-to-let.
The latest LSL-Acadata house price index, which is always worth looking at, shows this very clearly. It anticipates the official data from the Office for National Statistics (ONS) and confirms that, after slipping by 0.1 per cent in August, there has been no house-price inflation nationally over the past 12 months.
Nor is this a case of most regions doing fine while London struggles. Including or excluding London and the South East, the message is the same – flatlining over the past 12 months.
The real story
There is a trend in house prices, and it is a clear one. In the early part of 2016, annual house price inflation was around 9 per cent. A year later, it was down to 7 per cent, then 4 per cent and by this time last year, just over 2 per cent. The picture including London and South East has tended to be weaker in the past two to three years, but the two measures have now converged.
There are two ways of looking at this. The positive one is that affordability is improving. Average earnings are growing at roughly 4 per cent a year now, easily outstripping house price inflation, and any improvement in affordability has to be a plus.
The real story, however, is that even with ultra-low mortgage rates, buyer support is lacking, and that is why price inflation has disappeared. For all those ex-housing ministers in the cabinet, the message is clear: the housing market still needs fixing.