|This is a detailed study of housing market supply, demand, and prices – covering the main sub-markets, sub-market trends, and household preferences and buying behaviour.
The book will be of interest to senior executives in housebuilding and mortgage lending, real estate agents (brokers), and residential property investors and analysts. Good quality research and analysis in this area has become increasingly important as housing costs and investment have risen and developments in the housing market have impinged more on the general economy.
The study’s focus is on the British market. However, many of the findings apply to the housing markets of other industrial countries. Such issues as the costs and quality of residential properties and the macro-economic implications of fluctuations in house prices and mortgage interest rates are of public concern around the world.
1. The Housing Market: An Overview
Outline and summary of the main contents of the study*
2. The Supply of Housing
Introduction* Economics of housing supply* The production of houses* Housebuilding land* The supply of rented homes* Low-cost housing* New sources of investment finance*
3. The Owner-Occupied Housing Market and House Prices
Introduction and overview* Economics of the owner-occupied housing market* The demand for owner-occupation* House prices, incomes, and interest rates* House purchasing as an investment* The demand for and prices of individual houses*
4. The Rented Homes Market
Introduction* The main rental sub-markets and types of tenant* Regional variations* Factors affecting the marketability, demand for, and rents of individual properties* The economics of renting and letting*
5. Government Policy and Legislative Influences
Introduction and overview* Policies and legislation relating to rented housing* Urbanization control, development planning, and political-economic protectionism in the housing market* Taxation, owner-occupation, and mortgage borrowing* Monetary policy and interest rates*
6. Geographical Differences in the Housing Market and House Prices
Local-regional differences in prices* Differences in patterns of housing tenure, mobility, and turnover* Population densities, immigration, and rates of new household formation* Household characteristics* Economic growth rates, employment, and incomes* Forecasts*
7. Housing Sub-Markets and Demand Trends
The main housing sub-markets* Trends in demand* Regional sub-markets in the UK* The retirement housing market*
8. The Demand for and Marketability of Individual Properties
Key influencing factors* Price and value for money considerations* The financial costs/benefits of house purchasing* Positive locational factors (geographical environmental features, convenience and access, economic growth, employment, and incomes, prosperity, neighbourhood prestige, and housing demand, local government and taxes, local amenities)* Sizes and types of properties – and changing household expectations and requirements regarding* Facilities, fixtures, and fittings* Home-working demands* Heating, lighting, and energy consumption* Shared facilities and services* Safety and security features* Recreation and leisure requirements* Housebuilding materials and methods and marketing* Quality control and assurance* Housing design and aesthetic appeal* The demand for very old, period, and period-style reproduction houses* Designing and marketing attractive modern houses* House interiors and house settings*
PRICE & SPECIFICATIONS
Second revised edition 2012
113 two-column pages
Price £74.95 including free postal delivery
E-book price £15.39 (British pounds 15.39)
E-book ISBN 9780906321577
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● Housebuilding is still largely a speculative business. Firms typically first build houses, and then seek to sell them on the open market. To reduce the risk of market-price downturns – and having expensive unsold properties left on their hands – some firms have chosen to sell and build to order (off-plan) at a price fixed in advance. Selling and building houses to order is much more common in the United States than in Britain. Nonetheless, it is growing in this country. Pre-selling shifts at least some of the risks in housing transactions from the builders to the homebuyers. The builders are contractually certain of sales and can use buyer deposits as development and working capital (etc.). For their part, the buyers do not have the assurance afforded by walking around a development and physically inspecting a finished house before purchasing. However, they are sure of getting the home they want – and at a fixed price. In rising markets, many fortunate, households have made sizeable financial gains by buying early-on… (page 11)
● In Britain, there has been an upsurge in private investment in rented housing after the extension of tax relief to residential rented property investment schemes. Individual higher-rate taxpayers have been able to invest large sums annually in rented housing businesses free of both income and capital gains taxes. Investors have built or purchased many thousands of properties for letting at market-economic rents. Housebuilders have not directly benefited from such investment tax relief. However, they have been able to take minority stakes in other investing companies in addition to building and selling properties to them.
During a housing market downturn, many housebuilders will have stocks of difficult-to-sell dwellings on their hands. They may be prepared to dispose of such dwellings at a substantial discount (perhaps 25% off) to rented housing providers.
Finally, older terraced properties in Northern cities have often been attractive investment purchases. Many landlords have bought and refurbished such properties cheaply and enjoyed good capital growth as well as rental yields from letting to nurses, teachers, and other young professionals… page 28)
● Many homebuyers are purchasing properties as investments. Thus, major positive factors where they are concerned are the likelihood of sizeable capital gains from price appreciation and/or good rental incomes from tenants.
The availability of flexible low-cost mortgage loans, price discounts, and other special offers on properties tend to be especially attractive to first-time buyers. However, such things as price reductions for quick sales, offers of free furnishings or other goods and services, and generous part-exchange facilities can stimulate buyer demand in general.
Finally, effective selling skills and marketing methods help to sell houses just as they do other products.
Most households buy and sell properties through estate agents. They prefer estate agents who are knowledgeable of local property markets and skilled/experienced in advertizing properties. Prospective buyers often require detailed information on matters ranging from building materials and the structural aspects of properties, through local schools and transport facilities, to the energy consumption of dwellings. Estate agents may also have to meet the special requirements of particular types of household or market segment… (pages 43-44)
● Rents may also be unusually high because landlords’ costs and risks are particularly high – or because local housing markets are experiencing conditions of peculiarly excessive demand/under-supply.
Overall, the demand for rented residential properties rose considerably in late 20th century Britain. Owner-occupied house prices and average price/income ratios increased to historically high levels. Meanwhile, high interest rates resulted in high mortgage costs and made depositing money and renting rather than buying properties more attractive.
However, the owner-occupied housing market eventually experienced recession. Static/falling prices discouraged the investment purchasing of residential properties of all kinds – and gave a significant boost to renting…(page 55)
● With general rises in house prices/mortgage borrowing and the secular decline in the savings ratio, base rate changes have increasingly affected the disposable incomes of households.
The mortgage interest rate has assumed considerable overall economic importance. The negative effects of given increases in interest rates on household incomes – via the mortgage rate – have come to far outweigh the positive effects of higher savings deposit rates… (page 63)
● It is possible to make crude forecasts of the total number of new households that will form over the next decade or so based on current demographic data and trends in new household formation. It is also possible to point to regions where growth in numbers of households will be higher. If (say) the total population were to expand by a further one million, then statistically an additional 600,000 new households requiring housing might form.
However, in practice substantial unpredicted changes in key variables can and often do render forecasts invalid.
Patterns and levels of business-economic activity are constantly changing. Households’ demands regarding dwelling location, size, and facilities vary over time. So do house prices and calculations of value for money.
Immigration can also have significant unpredictable effects. Apart from indigenous new household formation and internal migration, any number of developments abroad might alter the number of foreign immigrants coming in to settle – and thus housing demand and prices… (pages 68-69)
● Housebuilders’ profit margins per dwelling unit tend to be 10-20% higher on larger and more luxurious executive-type properties than on smaller low-cost homes. However, this does not mean that builders who concentrate on higher price, higher value-added products will enjoy consistently higher profits and investment returns. In this as in other industries, higher and more sustained turnover can more than compensate for smaller margins on individual units.
In general, marginal fluctuations in house prices (mortgage interest rates, discounts and other special marketing offers) have less impact on the middle ranges of the housing market. Price elasticity of demand tends to be lower on the part of established middle-income, middle-aged owner-occupiers of standard-type family housing than amongst low-income/starter and affluent speculative investment-trading households.
However, flattening of demand and prices in the mainstream housing market can and does occur from time to time. This will result in some housebuilders moving into the more expensive, higher value-added capital-driven market – and others expanding supplies to the lower-price volume market in order to maintain their earnings.
In conditions of high economic growth and prosperity, the demand for larger detached, semi-detached, and bungalow properties is likely to be buoyant. As many as two-thirds of the homes built and sold annually might fall into this broad category. Overall, households will tend to pay the highest prices for
1. houses built in prestigious and secluded locations;
2. individually architect-designed detached houses; and
3. large luxury or executive-type houses with
· extra bedrooms for guests;
· master suites with elegant dressing areas (etc.); and
· other features especially attractive to affluent purchasers, high-earning executives on the move, and others concerned to make profitable investment purchases… (pages 71-72)
● Traditionally, builders have marketed suburban housing as offering simultaneous access to work, central urban facilities and services, and open countryside beyond conurbations. In addition, suburban accommodation has tended to offer better value for money in terms of spaciousness and facilities. Meanwhile, significant immediate environmental attractions of such housing have been generously sized gardens and the setting of dwellings in small quiet, tree-lined roads and cul-de-sacs.
Suburban houses can come with various individual design features. The complete bespoke design/building of houses to the specifications of particular households is still largely limited to the more-expensive end of the market. However, it is becoming steadily more common. Continuing technological advances in housing design, materials, and construction methods will facilitate it further in the future.
As said, there is a lot that builders can do to enhance the individuality, diversity, and overall visual appeal of conventional housing developments.
They can use a wider range of architectural styles and individual design features and exterior finishes. They can also build dwellings with more-varied dimensions, shapes, and structural layouts – especially in the case of relatively high-density developments.
Cladding high-rise apartment blocks in differently textured and coloured wood, galvanized steel, and GRC (glass fibre reinforced concrete) panels will often have aesthetically pleasing effects.
In cities such as London, high-density low-rise dwellings built around garden squares have been popular with house buyers for centuries.
Finally, simply curving roads and terraces instead of laying them out straight will often significantly enhance the attractiveness of new housing developments… (pages 109-110)