Why the UK housing market is different

This downturn started around 18 months ago. As soon as it kicked in, all of the experts who had been predicting the collapse of the UK housing market popped their little heads out of the woodwork and chorused in unison, "told you so".
Unfortunately for them, but less so for us ordinary home-owners,  their  visions of  a deflating housing bubble never really materialised. In certain parts of the country, house prices are significantly lower than they were. In others, though, they have hardly moved at all. While not exactly buoyant at the moment, the UK housing market hasn't quite fallen of the expected cliff; unlike some parts of the US, for instance, where it is possible to pick up substantial properties for just cents on the original dollar asking price.  
The reason is simple. As I wrote in September 2008: "This country still needs 3 million new homes to accommodate all the extra people we have allowed to settle here in the last 10 years. So, despite the turmoil in world markets, the shortage of mortgages and the impact of the stupid and pointless HIPS on the housing market, house prices are never going to go into complete free-fall. People who, two years ago would have bought a property are now having to settle for renting. Nonetheless, whatever they rent still occupies land and that is a commodity that becomes scarcer every year. As Mark Twain said: " Buy land. They can't invent any more".
Anyone who has ever read Adam Smith would have understood the reason for this buoyancy.
Despite rising unemployement, stingy mortgage lenders and the fear of being saddled with negative equity, people still need to move house for business, work or family reasons. The number of new homes built has barely scratched the surface of the numbers actually needed - probably 200,000 compared to the 3 million the Government would like to see built - so demand continues to outstrip supply. When that happens, it becomes very difficult for prices to fall very far.  

 I was minded to revisit this topic by two recent news items. The first was a statement by the Council of Mortgage Lenders that mortgage approvals last month were the highest they had been in over a year. So, people still see value in bricks and mortar. 
The second was an extraordinary speech by Housing Minister, John Healey, to the Fabian Society, the gist of which was that people should stop aspiring to home ownership and settle for long-term renting. The argument in favour of this approach was, basically, that trying to save to acquire a deposit for a mortgage was so difficult that young people should accept it as an unattainable pipe-dream and rent their homes instead; like most of our Continental neighbours are happy to do.
It would take a book rather than a blog to examine the wrong-thinking that went into this paper. Despite membership of the EU, the UK is nothing like the rest of Europe. Europeans tend to like apartment living; we prefer our own house and garden. Long-term rental is both normal and do-able in countries like Germany. It is virtually impossible here.  Few other countries suffer our population density, so land scarcity is not a big issue. As long as land is readily available, it remains relatively cheap. In the UK - and most particulalrly in England south of the Watford Gap -  land is scarce and getting scarcer every day; hence this Government's wish to concrete over the Green Belt. ( but that is another subject).
So, for a variety of reasons, Mr Healey's dissertation was long on words but short on commonsense. Given the fact that he has made it close to the top of the current administration, that shouldn't come as too much of a surprise. Neither, unfortunately, should the sheer hypocricy of what he is advocatng, which comes straight out of the Animal Farm guidebook to equality. Because the man who wants to see a return to long-term renting for the great unwashed turns out to be a serial flipper.
According to the latest tranche of Parliamentary Expenses, Mr Healey not only hoovered up all of the  benefits going, he also flipped his second home before selling it for a profit of some £88,000 in July of this year.
What a chance he missed to set a good example. Instead of cashing in on the property's increased value, he could have found some young couple to rent it to for an economic but affordable rent.