Avoid the Soundbite Solutions

There is nothing the media like better than an easy-to-digest soundbite, and for that reason this simplistic way of communicating has been well and truly adopted by our elected – and in the case of the EU, non-elected – political masters.  Sadly, these quotable nuggets seldom convey the complexity of any given situation, but they can and do convince people that they have a simple solution to what are often difficult problems. 

We have seen this disease quite a lot in the property market in the last few weeks.  First, Bank of England governor Mark Carney spoke of a ‘housing boom’, when what he actually meant was a very localised hotspot problem in London.  And just this week the EU Commission waded uninvited into the debate, offering unwanted and misguided ‘advice’ on how to deal with the supposed looming house price crisis. 

Both have concentrated on restricting demand for homes, with Help To Buy foremost in their crosshairs.  What this demonstrates is a criminal lack of understanding of what is happening on the ground. 

First of all, Help To Buy is not the problem – and to focus on it means the real problem will go untackled.  To put it into perspective, just four per cent of all property transactions have been through the scheme since it was launched, with the overwhelming majority helping first-time buyers purchase modest homes.  In London – where the ‘boom’ is concentrated – the figure is even lower. 

Amongst new house buyers, that proportion is much higher – between a third and a half for most housebuilders.  The reality is that Help To Buy is assisting in increasing supply, and that will help moderate prices. 

Trying to restrict demand simply won’t work; if people need somewhere to live, they need somewhere to live.  The solution lies in increasing the supply of housing, so that there is a better balance.  But that is a solution which is more difficult to encapsulate in a soundbite. 

The things that are holding back housebuilders from construction might surprise you.  It is not a shortage of land (there are plenty of sites with planning permission), nor is it anymore a lack of credit to finance building. 

Instead, we are facing a chronic lack of resources to do the job.  Years of property slump have resulted in reduced capacity to make materials, and a smaller workforce, just when we need more of both.  For example, the shortage of bricks has led one national housebuilder to buy and stockpile £10 million of bricks recently.   

It’s a bit like when fuel is in short supply – panic buying exacerbates the situation.  And of course, that imbalance of supply and demand drives up material and labour prices -bricks now cost around 40 per cent more than they did 18 months ago.  All this turn increases the cost of the homes themselves, driving up prices. 

So how to remedy the situation?  Government needs to recognise that acting on the supply side is the answer, perhaps by funding more construction apprenticeships, or by introducing specific investment allowances which will help materials suppliers ramp up production. 

What they shouldn’t do is look for a solution which can be neatly wrapped up in a ten word quote for the news.

Tony Abel is managing director of Abel Homes.  Twitter: @tonyabel