The Road to
Recovery:
The Housing Market in 2014 and Beyond

Richard Laming
Director of Economic Planning
Advanced Manufacturing?
Financial Services?
Professional Services?
Science?
Housing?
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 2...
Structure
• Macro Economic
Signals
• Demand Signals
• Supply Signals
• Conclusions
Macro Economic
Signals
Planning in a recovering market
Governor of the Bank of England, Mark
Carney, has said that housing market
recovery will h...
A strong performance in 2013…
• 2013: GDP growth four times OBR forecast
• Private consumption and housing
investment made...
Earnings growth critical to long term recovery
GDP Forecast
2.0

% Contribution

1.5

1.0

0.5

0.0
2012

2013

2014

2015...
Employment (change Sept-Nov 2013)

• Unemployment = 7.1 %

-3%
The largest
quarterly rise in
employment since
1971

• Empl...
“…no immediate need
to raise interest rates”
Consumer confidence
•

GFK’s Consumer Confidence
Index (running since 1974)

•

The scale of improvement in
the last 9 mon...
Demand
Signals
Long Term Population Growth
• +9.6 million people in next 25 years
• Natural change = 57% of projected increase

• this is...
Mortgage Lending- a long term view
400
350
300
£bn

250

200
150
100
50
0

Source: CML/ Analysis Turley Associates

Total ...
High LTV Mortgage Availability (fixed rate, Dec
2013)
3
2.5

Index

2
Products Available

1.5
1

Interest Rates
(average)
...
Source: CML/ Analysis Turley Associates

Nov 2013

Oct 2013

Sep 2013

Aug 2013

Jul 2013

Jun 2013

May 2013

Apr 2013

M...
Change in Average House Prices

Prices increasing
across all regions
as demand rises

Source: Nationwide
North West – Average House Price

Source: Nationwide
A long range view on house prices

• OBR forceast:

• 5% price growth in
2014
• 7% price growth in
2015
• Growing consumer...
Supply Signals
House Completions - England
• 107,820 homes delivered in
2012/13

• Q1 – Q3 2013 = 78,830
homes
• Significant shortfall
• ...
Planning Approvals: The North West
• c. 17,000 units have been granted
detailed planning permission (Q3
2012 to Q3 2013)
•...
Supply Implications
• Housing supply is “inelastic” due to :
• Supply of land in the right places at the
right time
• Time...
The Government’s Response to date

1. Reform of planning

Sufficient boost
to supply?

2. Help to Buy

3. Public sector la...
The Road to Recovery Conclusions
1. Improving confidence.
2. Improving credit supply.
3. Increasing house prices.
4. Positive outlook for 2014 and
beyond, ...
Place RESI 2014: Richard Laming, Turley Associates
Place RESI 2014: Richard Laming, Turley Associates
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Place RESI 2014: Richard Laming, Turley Associates

  1. 1. The Road to Recovery: The Housing Market in 2014 and Beyond Richard Laming Director of Economic Planning
  2. 2. Advanced Manufacturing?
  3. 3. Financial Services?
  4. 4. Professional Services?
  5. 5. Science?
  6. 6. Housing?
  7. 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. 8. Structure • Macro Economic Signals • Demand Signals • Supply Signals • Conclusions
  9. 9. Macro Economic Signals
  10. 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. 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
  12. 12. 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
  13. 13. Employment (change Sept-Nov 2013) • Unemployment = 7.1 % -3% The largest quarterly rise in employment since 1971 • Employment = 30.1 m +280,000
  14. 14. “…no immediate need to raise interest rates”
  15. 15. 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
  16. 16. Demand Signals
  17. 17. 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.
  18. 18. 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
  19. 19. 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
  20. 20. 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
  21. 21. Change in Average House Prices Prices increasing across all regions as demand rises Source: Nationwide
  22. 22. North West – Average House Price Source: Nationwide
  23. 23. A long range view on house prices • OBR forceast: • 5% price growth in 2014 • 7% price growth in 2015 • Growing consumer confidence
  24. 24. Supply Signals
  25. 25. House Completions - England • 107,820 homes delivered in 2012/13 • Q1 – Q3 2013 = 78,830 homes • Significant shortfall • No account for backlog
  26. 26. 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
  27. 27. 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
  28. 28. 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?
  29. 29. The Road to Recovery Conclusions
  30. 30. 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…

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