A simple question of supply

Oct 6 2004 By Scott Munro, The Journal

Housing is one of the most talked-about issues at a local level. For several years, house prices have spiralled, to the point where many first time buyers have been priced out of the market.

One of the forces that push house prices up is simple economics - supply and demand. The greater the demand, that is the greater amount of competition looking to buy that property which you have set your heart on, the higher prices people are willing to pay to secure the property.

The economy has also been frustrated at the low output of new houses being built.

An expert and specialist workforce including joiners, plumbers and electricians is required for most projects. The huge demand on this element of the workforce is made even greater when bearing in mind that such workforces are a limited resource.

Without greater numbers assisting in development projects, supply of new dwellings will continue to be limited.

We are increasingly being told that the housing market `bubble' has burst, and that prices may well fall. It remains to be seen how this will impact on the housing market, but the question remains, will we ever have enough decent housing?

In the North-East, the statistics released by the Office of the Deputy Prime Minister indicate that properties within council tax band A (up to £40,000) equate to approximately 57pc of all housing stock.

To put this into comparison in the South-East, only 6pc of properties are within council tax band A. Given this reaction is there really a problem of the availability of low cost housing in the North-East?

On the opposite end of the scale, in the North-East properties in council tax G and H (more than £160,000, and £320,000 respectively), equate to fewer than 2pc of properties.

In the South-East this figure rises to 9pc. It is a proven fact that the provision of higher-priced properties attracts business executives to the region, bringing a supply of jobs.

Difficulties stem from the general under-supply of quality housing in the market. If such housing were available, the market would move quicker.

Those in the lowest price properties, who aspire to a larger property, would be able to move if larger properties were available, releasing lower priced properties for first-time buyers. The knock-on would impact throughout the range and scale of properties.

Despite this reaction, authorities in Northumberland and the Tyne and Wear conurbations are seeking to restrict housing supply, contending that the environment cannot sustain increased numbers of dwellings.

In contrast to this, statistics actually report that there is sufficient brown field land in most locations to cater for increased demand. So what is the solution?

The Office of the Deputy Prime Minister and the Treasury want to tackle this problem head on. New projections on housing demand indicate a requirement for 25pc more dwellings than originally thought.

Clearly such figures indicate that demand is even higher than first thought and that the housing crisis may indeed worsen.

Ultimately the question is where and when will sufficient new housing be built?

New documents affecting the above will be released for consultation in the coming weeks and months.

It is important that those involved in building houses, whether it be an individual or a developer, ensure that their comments on the provision of housing are made at that appropriate time.

By Scott Munro, a planner at North-East law firm Ward Hadaway.