The housing market just keeps getting worse. The Bank of England kept rates on hold today at 5%, but the cost of taking out a new two-year fixed rate mortgage has risen to 6.63% - the highest rate in 8 years. New housebuilding this year is unlikely to exceed 100k units - well below the 240k that the Government wants. And it's been a dreadful week for UK housebuilders - Taylor Wimpey, Barratts, Bovis, etc have together announced almost 5,000 job losses in the last few days.
Good timing, then, for our latest housing report. Home Economics calls on the Government to stick to its pledge to build 3 million new homes by 2020. But we can't just build new houses anywhere - we need to build the right homes in the right places, by tailoring new housing to the needs of individual city economies.
We don't dispute the need to build more new homes, but we do think that the Government bangs on too much about the national 3m target. Instead, we need to see local authorities and housebuilders develop new housing supply based on a better understanding of local demand. Councils now have to base their new housing plans on detailed assessments of local housing need, but there are real concerns about the capacity of all local authorities to do this.
Caroline Flint today defended the 3m target, saying it was "still valid". Look out for some new announcements in the next week or so, aimed at easing the plight of the housebuilders and aspiring first-time buyers. And listen to Caroline's rather testy interview with Evan Davis on the Today programme this morning.
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