Yesterday’s Western Mail contained an article citing the views of the Royal Institution of Chartered Surveyors chief economist, Simon Rubinsohn on the Welsh housing market.
Mr. Rubinsohn told the paper that a two-tier housing market has emerged in Wales with first-time buyers cut adrift from the dream of home ownership. He said that even though the recession has forced prices down by 20%, a lack of finance means they can still not afford to climb onto the first rung of the property ladder.
But at the middle and top end of the market there is high demand for property, with estate agents reporting that buyers have turned to extreme measures to secure the home they want.
“A two-tier market has developed and it may become more acute in the shorter term. Our members have reported gazumping and sealed-envelope deals,” he said.
“But without some support at the bottom end of the market, that can’t be sustained. Ultimately, you need to have some first-time buyer kick to help move people up the property ladder.
“I think realistically, it’s not going to change dramatically in the short term. I think lenders have become a bit more lenient in terms of loan-to-value ratios, but first-time buyers are going to find it harder.
“Parental support is a feature across the country and it’s not one we feel comfortable about, but it’s the environment that’s not going to change dramatically in the near time.
“It’s going to be one of those hard grinds to get back to that position where first-time buyers without parental support will get a foothold in the market.
“It does worry me that we may be going away from being a nation of homeowners. For most people, the market is still pretty well unaffordable, even after a 20% decline.
“Worryingly, there is an environment where there are those able to take a step on the property market and those who are cut adrift. Arguably, it would matter less if there was a better array of private lettings around.”
The paper adds that the National Association of Estate Agents has reported the number of buyers looking for their first home has halved in just six months and is now at its lowest level for a year. They say that in November, just 19% of buyers were first timers, the lowest recorded figure since December 2008, when it also stood at 19%.
NAEA president Gary Smith said: “Unfortunately, as first-time buyers often form the foundation of selling chains, there could be repercussions across the market.”
Peter Hughes, chairman of the Council of Mortgage Lenders (CML) Wales, said: “It’s fair to say first-time buyers have been at the sharp end of the credit crunch and there’s still a paucity of funding.
“I know a vibrant first-time buyers’ market is core to a strong housing market and lenders are keenly aware of that, but it’s a question of balance.”
All of this has implications for Welsh Goverment housing policy and in particular the need to ensure that the investment in affordable housing especially that for rent continues over the next few years. Unfortunately, because of money being brought forward from future years spending and despite other funds being obtained, the amount of Social Housing Grant available for new developments has started to dry up. Having missed its halfway target for increasing the number of affordable homes by 6,500, the Welsh Government looks like missing that target altogether by 2011.
There is still no satisfactory key workers scheme in place to help people in low paid employment get onto the housing ladder, whilst the private sector rental market remains unaffordable for many, largely due to housing benefit rules and the need for substantial up-front deposits.
The fact that there are still 26,000 empty private sector homes around Wales is a scandal, as is the fact that the Welsh Government still has no strategy to start tackling that problem. The approach of local Councils to the use of planning gain to acquire new affordable houses remains mixed and in any case is stymied by the current recession.
I have gone on record in the past to say that the Deputy Housing Minister is doing a reasonable job in the circumstances in which she finds herself, but unless she starts to adjust her policies soon so as to meet these challenges then the housing crisis in Wales will worsen over the next few years.
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