A housing crisis?

"Surprisingly (to me at least), there is some talk of interest rates coming down from the precipitous heights of 0.5%. Why, I don’t know."

Okay, I know, the last one’s ridiculous (for now). So which is it? Well, its probably a bit of all of the others, depending upon where you live, and how much you earn, and whether or not you already own a house.
 
Surprisingly (to me at least), there is some talk of interest rates coming down from the precipitous heights of 0.5%. Why, I don’t know. This has led to falling mortgage rates, as lenders' concern over a Bank of England rate increase recedes. The average borrower paid only 2.41% on a new mortgage in April.
 
Low interest rates are part of the reason asset prices (including property) have increased as they have over the past few years. The longer they stay low the less chance there is of them being increased, without severe damage being caused to the housing market. If interest rates fall, people can afford to pay more for property. In the UK where housing supply is restricted, and demand increases (due to, say, a rising population) prices go up!

As I’ve previously opined interest rates won’t be going up any time soon. There are many reasons why this is the case. Too much debt, countries trying to push their currencies down to gain competitiveness against their international rivals to mention a couple. Another is simply that the longer interest rates stay low, the more people borrow large amounts at low rates, and arrange their financial affairs to reflect those rate levels, the more people will get caught over exposed when rates “normalise” (whatever that means).
 
The Government is trying to help us all out here. I guess it anticipates how this is all going to pan out. Either that, or it is reacting to events as they unfold (more likely, I think). The Housing & Planning Act 2016 came into being a few weeks ago. As well as introducing Starter Homes (in a nutshell – 20% cheaper homes on new build sites for first time buyers aged between 23 and 40 - more help with affordability) it also brings in a number changes designed to make obtaining planning permission simpler. This includes the idea of automatic planning permission in principle being granted for housing led development on land allocated for that purpose in a Development Plan. Also there is the idea of registers being prepared by local authorities of brownfield land.
 
My view is the new Act is good for what it does (while oddly impliedly suggesting that people under 23 don’t buy houses any more) but we need a more radical change in our planning system to make planning permission easier to come by and to encourage house builders to build more houses. Currently builders have to complete for sites due to limited supply of land for new housing. Landowners can be made multi-millionaires overnight. We need sites to compete for builders not builders competing for sites – only then will the price of land come down and the price of houses stop their upward march. Will anyone take this bold step? Let me know what you think.