4 min read

Five surprising facts about Britain's housing market

I’ve just (belatedly) come across the excellent Hypostat report from the European Mortgage Federation and thought a few of its tables were worth sharing – as comparables on housing markets and mortgages aren’t as commonplace as one might have thought. In fact, some of them are quite different to the received truths about the UK housing market (click on any of the tables to see a bigger version):

1. Britain’s owner occupation rate is now below the EU average



It’s a striking finding, given many assume that Britain tends to have a higher proportion of homeowners than other countries. In fact, it’s less than the EU’s average and lower than the equivalent figure in the United States. It is, however, higher than it is in Germany or France.

2. Britain’s homebuilding rate is among the worst in the world



The above is a chart of housing starts – eg the number of new homes starting to be constructed – in various countries. Clearly the figures are not by proportion of population, but let’s compare France and the UK, both of which have pretty similar population levels – about 64 million. As you can see, in 2011 alone French housing starts were almost as much as Britain managed in 2009, 2010 and 2011 combined. Granted, that seems pretty shocking. And indeed Britain’s homebuilding rate of 0.21% (compared to the population) is among the lowest in the Western world. However, it’s not that far below the United States (0.25%) and Germany (0.27% – note I’ve used housing completions for Germany). France’s 0.46% rate is very high by international standards.

Also note the enormous collapse in Spanish housing starts. In 2006 it was building almost a million new properties a year. This year it’s barely more than 40,000. And the same for Ireland, where barely more than 4,000 homes were built last year. No, that’s not a typo. If Britons think they had it bad in terms of current homebuilding, they can reflect that the English county of Hampshire built more homes during the same period.

3. But Britain doesn’t necessarily have a housing shortage. Yet.


The upshot of the chart above (eg not enough houses being built over a period of years) is the threat of a big long-term mismatch between housing supply and demand. Again, compare France and Britain. They both have similar-sized populations of around 64m. And yet France has 34m homes and Britain 27m. That said, Britain’s housing supply ratio of 0.43 homes per member of the population isn’t actually all that bad in comparison with other countries. The US equivalent ratio is lower at 0.42. That said, Germany’s is up at 0.51 (eg one home per two members of the population) and, following its building spree, Spain’s is up at a staggering 0.58 homes per resident. Discuss.


4. Nominal house prices – just look at Ireland


Rather a useful chart, this one. The results are more or less what you’d expect. I was staggered, though, to see just how far Irish house prices have fallen. They’ve essentially halved (in nominal terms, mind – in real terms the fall will be greater still) between 2007 and 2012. Admittedly from a massively over-priced level but, all the same, that’s some serious wealth erosion. Elsewhere the story is more or less as you’d expect: the UK up since 2008; the US down quite sharply.

5. Guess who the most (household) indebted country in Europe is. Clue: it’s not Britain



That’s right: in spite of what you might expect, the UK’s level of mortgage indebtedness is, when compared to average incomes, not the highest in Europe – though with mortgage debt of 119% of disposable income it’s well above average. The countries with the really eye-watering levels of mortgage debt are the Netherlands (227% of disposable incomes); the Nordic nations, Denmark (205.7%), Sweden (156.5%) and Norway (156.4%) follow soon afterwards. And while Ireland has been doing what it can to reduce its level of indebtedness, its households still owe 140.7% of their disposable incomes to the bank.



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