Despite all the more pessimistic figures from the Halifax, the Royal Institution of Chartered Surveyors and Hometrack, the Centre for Economics and Business Research (CEBR) has said that a lack of supply will force house prices up over the coming years.

The CEBR sees the market stabilising from its recent falls by the end of the year with the improving state of the banks’ balance sheets allowing them to lend out more money.


But due to the recent economic downturn and consequent lack of investment in new house building there will be a lack of housing supply to meet demand the CEBR says. This lack of supply has already imposed an upward pressure on rents and house prices should therefore follow.

But this seems to ignore the economic realities. People are not getting pay rises (some are effectively taking pay drops) and the economy and therefore employment is still fragile.

Banks may well have more money to lend, but only the most solvent need apply. The banks are also still wary of lending to landlords with large portfolios.

prefabMany landlords may well want to expand their portfolios at this time but they need to get the deposit for new acquisitions from somewhere and, without cash in the bank, may not find a willing lender ready to allow them to withdraw equity from their current properties.

The last property boom resulted in too many properties of the wrong sort being built in the wrong places (BTL flats in Leeds springs to mind).

Without enough of the right houses in the right places something will have to give in the end.

The headache the government and banks have though is that any national house building project that is large enough to deal with the supply shortage will depress house prices. But it will have to be done and the longer it is left the larger the headache. Until we possibly end up with a rush job like the one we ended up having forced on us at the end of WW2, which ended up with thousands of prefab style houses.

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