Worst housing crisis in thirty years

SevenPillars: the Government is subsidising houses - £3.5 billion over the next five years - there were a load of announcements just recently about housing association "affordable" home projects that are going to be funded. Affordable homes are also subsidised by developer and builders, who have to give away between 33-45% of their units to housing associations and are only reimbursed for the build cost, with not a penny for the land or development or finance costs. There's a huge number of affordable homes in the pipeline, all to house the underclass and public sector workers at ultra-cheap rates. The actual number of new-builds for private sale is nowhere near the 105,000 supposedly built this year. I've just built four new-build flats myself, and the main problem holding back the massive demand is not affordability in terms of monthly income, but the size of deposits demanded by banks. Mortgages are extremely affordable at the moment: you can get a 3.99% interest rate fixed for 10 years with the Chelsea, with a 70% LTV. This means you can buy a new 2-bed flat or house for £200K in my area, and your £140K loan will cost you just £477 interest-only a month for 10 years, much less than the cost of renting, so you can spend the surplus on paying down your mortgage. The downside is that you need a £60K deposit to get started. Hence why the rental market is so strong at the moment.

@nickpike "prices are twice what they should be" If only we lived in a dictatorship we'd have someone who could mandate prices. Until then you'll have to accept that supply and demand sets the price.

meldrewreborn Demand from a limited number of buyers at current price levels are keeping the market going. Sales are massively down from 2007 due to the contraction and availability of mortgage credit and the conditions attached to that credit. Sellers have not been put into the forced selling position in part due to Government and Central Bank intervention after the financial collapse of 2008. Had the banks been allowed to go bust, a potential doomsday scenario that the free market probably would have inflicted on us had there not been intervention, we may well have had a house price collapse at some stage as a side effect of banks having no money to lend and the resulting economic recession/depression. I'm not suggesting that this should have happened, but it bursts the bubble of those that believe the Government/Central Banks/VI's don't intervene to save the asset bubbles they have helped create. I think I mentioned the over supply issue in the US, but didn't expand upon it. I would accept that we haven't done the same here in the UK and some use this as evidence as to why prices here will not fall. I'm not sure it matters when we have a restrictive mortgage market where banks are reluctant to lend because they know what really happened in the past. The industry could build 250,000 houses a year for the next five years, but if they tried to sell them at current market prices the vast majority would lie empty for years, so they aren't going to build anyway and the Government isn't going to subsidize them.