Paresh Raja, CEO of Market Financial Solutions

The Government has shown in recent months that it is serious about tackling the lack of housing supply in the UK property market. From setting the target of building 300,000 homes every year to proposed reforms that encourage home extensions in built-up areas, Theresa May has put solving the housing crisis at the top of her agenda.

The intergeneration divide

With a recent study from letting agent Savills revealing that young people still face profound difficulties when attempting to get on the property ladder, the need for proactive reform could not be greater. The report found that homeowners aged 50 and over hold £2.8 trillion of the UK’s housing equity, compared to those under the age of 35 who hold just £221 billion. While an intergenerational divide in property ownership is natural, the stark contrast between these two figures suggests millennials are finding it particularly tough. In South West England, the generational divide is even more drastic, with those over 50 owning around 80% of the region’s property wealth, compared to just 4% of those under 35.

The fundamental issue the Prime Minister needs to solve is rising property prices. Although a recent study found that 73% of those between 18-35 expect to buy a home sometime in the near future, the rapid increase of house prices has made it harder and harder to get on the property ladder. In fact, the average house price is now 7.6 times the average annual salary, or 14.6 times in London. It is, therefore, unsurprising that as wages have failed to keep up with house prices, troubles in making the leap onto the property ladder have heightened.

A wider market problem

The challenges of home ownership are not limited to millennials – homeownership across the country fell to a 30-year low of 62.9% last year. Evidently, action is clearly warranted to ensure this does not fall further. Recent reforms such as stamp duty exemptions for first-time-buyers when purchasing a property up to £300,000 are encouraging; however, what is needed is a comprehensive plan that tackles the structural issues that inhibit more properties, both new-build and traditional, from entering the property market.

Supporting SME developers

The simple answer to the lack of housing supply is, of course, to create new builds. However, the practicalities of this are easier said than done, and there are significant factors preventing their construction. For example, a recent survey by the Federation of Master Builders found that 54% of small to medium-sized developers find accessing funds the major barrier to building more homes.

Importantly, there are ways of addressing these problems, including a willingness among developers to look beyond traditional mainstream lenders. In fact, the Association of Short Term Lenders announced last week that 93% of its members believe that short-term finance is ideally positioned to support SME house builders in the future.

The Government has committed to support SME developers so they are better able to compete with larger firms. Given the difficulties in acquiring finance, action is clearly needed so that SME developers are in the position to build more new homes – thereby increasing housing supply, controlling prices and allowing more people to jump on the property ladder. Creative measures such as this are clearly needed so that there is a less of a stark division between millennials and the older generations when it comes to home equity.

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Paresh Raja, CEO of Market Financial Solutions

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