Peter Williams, Executive Director, IMLA and University of Cambridge The economy and the housing market post the General Election

My presentation Focus on the latter and on England! Complex dynamics at work Many unknowns! Conclusions

The Economy Many positives; Certainty Low inflation/falling prices Strong Pound Low interest rates and for longer? Strong employment/falling unemployment Rising real wages

The Economy The MPC now suggest lower growth (2.5% not 2.9 in 2015 and lower going forward) Inflation expected to rise by end of 2016 Potential interest rate rises in 2016 Household spending still a key variable Productivity still low The Bank’s record!

Commitment to reduce borrowing, intervention and regulation Positives and negatives as GE highlighted Uncertainty re EU referendum Uncertainty re Scotland Plus Greece, Ukraine Concern re Current Account deficit (£98bn - 6% of GDP) and impact on sterling The impact of cuts – on people, sectors and local government The Economy

Outlook Positive/negative Many unknowns Still unwinding interventions –QE, low interest rates, Bank ownership etc Process will be gradual Responses not known

Housing and the housing market Short term positive Removal of threats re Mansion Tax and PRS regulation Confidence and sentiment Though chaos re who is Minister – Francois or Lewis –seems to be latter!

Housing and the housing market Longer term less certain Price inflation –manifesto big on demand, weak on supply? Cuts to local government reduce supply? No real evidence supply challenge will be met Thus further price inflation/volatility

The Context Housing supply not increased in response to a sharp increase in population Population grew by 7% to 60.4 million in the 30 years to 2005, The UK’s population increased by another 8% to 64.1 million in 8 years to Housing starts had only edged up from 139,000 in 2010 to 149,000 in 2013

The Conservative Manifesto Our commitment to you: The chance to own your own home should be available to everyone who works hard. We will: help to keep mortgage rates lower by continuing to work through our long- term economic plan build more homes that people can afford, including 200,000 new Starter Homes exclusively for first-time buyers under 40 extend the Help to Buy Equity Loan scheme to 2020 to help more people onto and up the housing ladder, and introduce a new Help to Buy ISA to support people saving for a deposit give more people the chance to own their home by extending the Right to Buy to tenants of Housing Associations and create a Brownfield Fund to unlock homes on brownfield land ensure local people have more control over planning and protect the Green Belt

The Conservative Manifesto No clear numbers on housing supply Starter homes have issues Right to Buy brings private borrowing of £69bn into public debt Help to Buy evaluation? Green Belt protected yet…? Nothing about PRS or Social housing

CML Forecast December 2014

IMLA Forecasts

Housing Loans after the onset of recessions : 1980 to date First Time (inc RTB) BuyersHome Movers ( 2 nd or higher time buyers)

Conclusions Overall outlook positive in short term for both economy and housing market Lots of possible threats –EU etc But longer term both economy and housing look more vulnerable Housing issues unresolved and tensions growing around prices/affordability and availability Meeting aspirations re owning/renting