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Housing supply being squeezed - prices will rise

24th January 2008 | back to article listings BACK    print this article PRINT

the RICS has today confirmed our analysis late last year that 2008 and perhaps 2009 also will have substantially fewer completed new homes brought onto the market over the next year or two at least.

Over the past few weeks, the major housebuilders have all said they expected lower sales volumes in 2008 although prices should remain broadly steady.

Simon Rubinsohn, Rics economist, said: “The indications are that the number of housing starts in 2007 is going to be weaker than in 2006 and now we have negative signals for 2008.” 2006 housing starts were already well under the government target of 240,000 a year.

Our view is that there is no hope of hitting government targets for at least several years to come with NIMBYism, local planning constraints, development finance limitations etc. This will lead to a continuation of house price growth and significantly greater demand than supply for years to come.

Finally Ed Balls has now got in on the act of government attempts at meddling with interest rates following Gordon Brown's and Alistair Darling's clumsy comments a few weeks ago. He too commented that rates should drop and that there was room to do so. We don't disagree with them but this type of government interference with the independence of the Bank of England was probably part of the MPCs decision not to move in January as a point of principle - the good news is that in February they will have to drop rates, possibly by 0.5%, regardless of any amount of anti-independence government comments.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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