Fears that the housing market recovery could "overheat"

Huw Oxburgh's picture
Authored by Huw Oxburgh
Posted: Tuesday, December 10, 2013 - 12:03

As the South West housing market continues to show signs of economic recovery commentators have warned of the danger of the market may “overheat”.

A new report by the National Housing Federation (NHF) argues that “whilst economic growth has returned to many areas, this has caused the already over-stretched housing market there to overheat.”

In their “Home Truths” report they argue that rising rent and house prices are forcing working people onto housing benefits at the rate of 310 people every day.

The NHF also claim that if house prices continue to rise there is little chance of people especially, young people and people on low wages, getting onto the housing market.

David Orr, chief executive of the National Housing Federation, said: “We hear a lot about ‘making work pay’, but a decent job won’t even cover the cost of a home in England. Billions of pounds of taxpayers’ money is wasted, lining the pockets of private landlords, when it could be better spent building more homes people can afford. Relying on the private rented sector so heavily is a costly sticking plaster rather than a solution.”

A survey from Royal Institute of Chartered surveyors (RICS) supports the NHF’s prediction of an increasingly expensive housing market.

The survey of surveyors shows that price expectations for the region are also rising with November having the highest levels since 2007.

Roger Punch, RICS Residential Spokesperson for the South West, said: “The recovery in the South West housing market continues with the sales expectations for the next three months reaching a new record level, in some parts of the region, showing continued confidence in the market with house prices also expected to rise again.

“The increased confidence and various initiatives are continuing to encourage people into the market, although the delivery of low cost housing as supply remains an issue. This increase in people looking to buy, rather than rent is continues to be reflected in the South West rental market with both tenant demand and new landlord instructions falling.

“Once we are into the New Year, we expect a return to strong activity and sellers will continue to benefit from professional advice not only regarding pricing regarding their particular locality, but also in the management of their sale in a potentially changing market.”

Both groups have argued that there is a need for new housing developments in the region to improve the market.

In a separate survey from recruiters Manpower shows that employment prospects are on the rise in the South West.

Andrew Shellard, Operations Manager at Manpower said: “Breaking down prospects across the region, in Plymouth we have seen an increase in permanent vacancies most recently, particularly in sales and engineering.

“At the minute Exeter is booming and there are excellent prospects for candidates due to lots of new companies moving into the area. The volume of candidates looking for work here has reduced and the city seems to have more going on in the jobs market than in the previous quarter.”