The real problem is one of people, not houses

Mention has been made of the KPMG Guernsey Housing Survey, which can be downloaded from the internet. I would urge interested parties to do so and read it with a questioning eye. You will see that, apart from those about collecting data, the proposals are hedged with ifs and buts. Some, moreover, could have serious financial consequences for participants, as a report which appeared on BBC Radio 4 will illustrate. This concerned developments of homes for older people who were not yet ready for a care home. The properties sold well when new but later when the first owners were ready to move on they found that they were now in a buyers’ market facing massive losses. A similar situation arises if we try to build down to a price to entice first-time buyers into the market. If or when the market softens they could be left with massive negative equity.

So how did we get into this mess? In the last third of the 20th century the record number of people born in the 25 years after World War Two entered the housing market, increasing demand. Planning laws became more restrictive, limiting supply. The earnings of women grew, interest rates fell and lenders became more generous, which enabled people to pay more. The result is that prices have risen around four times the rate of inflation, the less well off face crippling housing costs and the States is treading a tightrope between helping them and collapsing the market. Most importantly it is now the few private developers large enough to work within the constraints of the planning laws who decide what they are prepared to build, not the DPA or the States.

Now let’s look to the future. In recent decades the birth rate has been falling, a trend which is accelerating as the number of women of child-bearing age declines. This means fewer locally-born potential first time buyers. With the first of the baby boomers now in their mid-70s the death rate is set to rise, which means more empty homes. Sooner or later therefore the balance of supply and demand will tip and prices fall. Unless.

Time to introduce the elephant in the room, migration. At present, the natural population turnover (births and deaths) is around 500 or so a year. Migration is 3-4,000 a year each way and can fluctuate significantly, causing a dramatic effect on the market. To illustrate, the market recovered well after the sub-prime mortgage crash, stagnated in the middle of the last decade and is now picking up. April 2008 to March 2012 saw net inward migration of 876, April 2012 to March 2017 net outward migration of 993 and April 2017 to March 2020 net inward migration of 1,158. Coincidence? I doubt it. To make matters worse, these fluctuations can be completely out of our control. It is not unreasonable to conclude that the departure of over 460 people in the year ending March 2013 was caused by the ending of Low Value Consignment Relief in April 2012 and the subsequent demise of the fulfilment industry.

It seems to me that the real problem is one of people, not houses. The 2020 E-census shows there are only two under 20-year-olds for every three people between 45 and 64, a shortage of around 6,000. Raising the pension age, automation and so on won’t bridge that gap. This means even larger migrant figures and greater instability. This will make it difficult for developers to predict future prices and expose owners to an uncertain future.

It seems to me therefore that we need to sort out our population policy first and then work out where they’re going to live.

LAWRENCE HARDING

Rougeval

Torteval

GY8 0PE