1. The Road to
Recovery:
The Housing Market in 2014 and Beyond
Richard Laming
Director of Economic Planning

2. Advanced Manufacturing?

3. Financial Services?

4. Professional Services?

5. Science?

6. Housing?

7. The importance of housing to the economy
8
7
6
Low: 3.3% GDP
Per cent
5
4
3
2
1
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
New buildings
1
Private sector, including transfer costs.
Source: O NS
Source: OBR
Improvements to dwellings
Transfer costs

8. Structure
• Macro Economic
Signals
• Demand Signals
• Supply Signals
• Conclusions

9. Macro Economic
Signals

10. Planning in a recovering market
Governor of the Bank of England, Mark
Carney, has said that housing market
recovery will help spur economic growth in
the coming months because rising house
prices tend to go with an increase in
consumer spending.
He explained that a stronger mortgage
market was usually linked with easier credit
conditions and higher income expectations.
Mr Carney also downplayed fears of a
housing bubble commenting that a pick-up
in housing was "initially an important part of
the recovery". However, he added that the
Bank was "vigilant" to the threat of a house
price bubble and that there was a "broad
range of tools" to deal with surging prices.
Financial Times 14/11/13

11. A strong performance in 2013…
• 2013: GDP growth four times OBR forecast
• Private consumption and housing
investment made an important contribution
to economic growth
• Business investment and net trade
remained subdued during 2013

13. Earnings growth critical to long term recovery
GDP Forecast
2.0
% Contribution
1.5
1.0
0.5
0.0
2012
2013
2014
2015
2016
2017
-0.5
-1.0
Private consumption
Business investment
Dwelling Investment
Government
Change in inventories
Net trade
Source: CML/ Analysis Turley Associates
• Growth in earnings dependent on productivity growth
• Higher levels of business investment forecast 2015
2018

14. Employment (change Sept-Nov 2013)
• Unemployment = 7.1 %
-3%
The largest
quarterly rise in
employment since
1971
• Employment = 30.1 m
+280,000

15. “…no immediate need
to raise interest rates”

17. Consumer confidence
•
GFK’s Consumer Confidence
Index (running since 1974)
•
The scale of improvement in
the last 9 months greater than
at any time in the last 40
years
•
Latest index (Jan 2014)
shows:
•
Improvement in
personal finances
•
Expectations improving
with regard to the health
of the economy
•
Confidence improving in
relation to making
“major purchases”
Source: Research carried out by GfK on
behalf of the European Commission

18. Demand
Signals

19. Long Term Population Growth
• +9.6 million people in next 25 years
• Natural change = 57% of projected increase
• this is not just an immigration debate
• Widely acknowledged that England needs to
plan for 250,000 to 300,000 homes p.a.

20. Mortgage Lending- a long term view
400
350
300
£bn
250
200
150
100
50
0
Source: CML/ Analysis Turley Associates
Total Gross Secured
Lending

21. High LTV Mortgage Availability (fixed rate, Dec
2013)
3
2.5
Index
2
Products Available
1.5
1
Interest Rates
(average)
0.5
Source: CML/ Analysis by Turley Associates
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
0

22. Source: CML/ Analysis Turley Associates
Nov 2013
Oct 2013
Sep 2013
Aug 2013
Jul 2013
Jun 2013
May 2013
Apr 2013
Mar 2013
Feb 2013
Jan 2013
Dec 2012
Nov 2012
Approvals (thousands)
Mortgage Approvals
80.0
70.0
60.0
50.0
40.0
30.0
Purchase
Remortgage
20.0
Other
10.0
0.0

23. Change in Average House Prices
Prices increasing
across all regions
as demand rises
Source: Nationwide

24. North West – Average House Price
Source: Nationwide

25. A long range view on house prices
• OBR forceast:
• 5% price growth in
2014
• 7% price growth in
2015
• Growing consumer
confidence

26. Supply Signals

27. House Completions - England
• 107,820 homes delivered in
2012/13
• Q1 – Q3 2013 = 78,830
homes
• Significant shortfall
• No account for backlog

28. Planning Approvals: The North West
• c. 17,000 units have been granted
detailed planning permission (Q3
2012 to Q3 2013)
• Quarterly approvals show upward
trend, but
• 17,000 units = Less than 1 year
required supply
• RSS = c. 23,000 p.a

29. Supply Implications
• Housing supply is “inelastic” due to :
• Supply of land in the right places at the
right time
• Timescales involved in the planning
process
• Mortgage availability

30. The Government’s Response to date
1. Reform of planning
Sufficient boost
to supply?
2. Help to Buy
3. Public sector land supply
What more can
be done?

31. The Road to Recovery Conclusions

32. 1. Improving confidence.
2. Improving credit supply.
3. Increasing house prices.
4. Positive outlook for 2014 and
beyond, but
5. Housing supply continues to
lag behind.
Time for creative
solutions and
innovation…