House prices in Woking
Last night I attended the hustings meeting at the HG Wells Centre with all the different candidates standing for the Woking Parliamentary constituency. Although the questions from the moderator touched on a range of different national issues, from foreign policy through to the NHS, many of those present were concerned about housing affordability, with several members of the audience stating that as young professionals they found it impossible to get on the property ladder and felt they were being pushed out of the borough by high house prices.
Woking is one of the most expensive places in the country to live, with house prices and rents on a par with London. The average house price in Woking is around £440,000. Taking the measure of affordability as three times annual salary, this means that even with a £40,000 deposit a couple would need a joint income of £130,000 to be able to purchase a property, a staggering calculation when we consider the average salary is around £26,000. While such prices are clearly unaffordable for most the population, the reality is that the South East is home to many wealthy or highly paid people with significant assets, and demand for homes, even at these exorbitant rates, remains high.
High house prices do not just cause problems for those who wish to wish to buy a property but are unable to do so. As the cost of accommodation eats up a bigger proportion of people’s income, purchasing power is reduced. Expensive rents make it difficult for people to live away from their parents, or for those looking to transition from unemployment benefit to financial independence. It reduces social mobility, as those with parents who can help out with a deposit get an early foot on the ladder and benefit from rising prices, excluding those who are unable to call upon such assistance. It also makes it difficult for companies or public services to recruit staff, with the South East in particular struggling to fill positions in nursing and the police due to employees being unable to live in the area where suitable roles are available.
There are, in my view, three reasons for the current disparity between average incomes and housing affordability, but sadly two of these are outside the control of local government. The first reason is that successive governments have encouraged high levels of immigration, with people being attracted to Britain thanks to our relatively buoyant economy compared to other European countries. More than 3 million people have come to live in the UK since 1997, increasing the demand for housing. Secondly, during the boom years under the last government, the Bank of England held interest rates too low, encouraging easy credit and a mortgage bubble which artificially inflated property values. While the 2008-09 recession brought in an element of correction, the uncertainty in the global economy and wildly fluctuating commodity markets means that London property is seen as a safe haven for international investors, particularly from China, Russia and the Middle East. This has had a ripple effect, spreading out from the centre of the capital to other parts of the South East, and has been a driver for the big increases in house prices we have seen since 2010 as the economy has picked up.
The final reason for high property prices is that local government has sought to shirk its responsibility and has built too few houses to cope with demand. This is particularly the case in London, where only a third of the homes needed to keep pace with additional demand was built in the last year. The Localism Act took decisions about housing targets away from central government and devolved them to local authorities, but unsurprisingly almost all councils opted to reduce the number of new properties they built rather than increase it.
Woking has a better record than most in terms of delivering new housing units, with substantial flatted developments going up in the town centre in recent years and more to come through the Victoria Square development and on the old St Dunstan’s church site. There have also been significant new developments in Brookwood Farm, Moor Lane, Ryden’s Way and elsewhere in Westfield. The redevelopment of Sheerwater will also bring more homes onto the market. It is true, however, that the council has not been successful in meeting its targets for delivery of ‘affordable’ units. In any case, I dislike the designation of properties as ‘affordable’, which despite the label does not mean that such homes are within reach of those on average incomes, but rather that they are eligible for various subsidy, shared equity or incentive schemes for key workers or other groups who meet certain criteria but which excludes most of the working population. Housebuilding is also extremely unpopular in Woking, with the bulk of the borough comprising green belt land and an active and vocal community which has in the past fought to resist new development.
So what is to be done? There are some who pray for a house price crash, as they think this will allow them to buy a home which they cannot afford at the moment. Sadly, it is not so simple, since during times of falling house prices banks tighten their lending criteria, demanding higher deposits and reducing the loan-to-value ratio which they are willing to offer, often excluding those who might otherwise benefit from lower prices. Falling house prices are also an indication of more serious economic troubles and are usually accompanied by job losses or slowing growth, all of which has an impact on people’s ability to take on or service a mortgage.
Unfortunately, as stated earlier, the underlying problem is out of the control of local government, and there is little that any council can do to dramatically increase affordability. I would like to see the council prioritise development of smaller homes which are within the budget of the average family, and make better use of brownfield land which is already available for development. I also think we need to move away from using high rise buildings as a means of trying to meet numerical targets when most of these flats are luxury developments unaffordable for most people and which are bought by those coming in from outside the borough. Finally, the council should see through its strategy to refurbish more empty homes and bring them back on the market.
Ultimately the council will need to make a serious and responsible decision about whether it wishes to allow more building on green belt land to meet some of the pent up demand. Those who oppose any green belt development need to have sensible alternative suggestions for how else we will meet our housing needs. With house prices as they are, it is unsustainable to automatically exclude 64% of the borough from new housing. Such a decision is likely to be extremely unpopular, but the alternative is to continue to allow rents and home ownership to become less affordable, for social mobility to reduced further, for inequality to deepen, and for professional people to feel that they cannot build a future for themselves in Woking.