A new era of ‘dream home’ ownership is coming, and it’s about time, writes Phillip Nunn of The Blackmore Group.
The economics of home ownership is fundamentally broken. Take a family of four – two adults on average incomes raising two children. They can afford to buy a moderate family home, right? Wrong. In many parts of the UK, house prices are now more than six times what they should be. The only way that will reverse itself is if house prices are halved or family incomes double. My money isn’t on either of those things happening anytime soon.
Let’s look to developers and estate agents. They have a vested interest in maintaining the housing market and most believe that it will swing back into action due to excess demand for housing.
But this belief is fundamentally flawed, because the desire to want to be a homeowner isn’t matched by a market where that demand can be met. The cold hard fact is that housing is no longer affordable. While there is some market activity, it’s largely amongst those already on the property ladder – upgrading or downsizing. The issue is that very few people can get anywhere near the bottom rung of the ladder. It’s going to take something seismic to get that swing.
Looking back, there was a time from the early 1960s to 2008, which was largely perceived as the ‘golden era’ of home ownership. It was a time that saw a whole generation of now-retirees able to get a mortgage, pay it off and own their homes.
But during this so-called ‘golden era’, there operated a dysfunctional banking system which, since the crash, has been in a perpetual state of default. It’s destroyed the home ownership dreams of the generations that follow our parents and grandparents.
The new era of home ownership
There is hope, however, but the whole industry needs to think carefully about its next move to avoid the pitfalls of the broken housing market.
We’re now entering a hugely critical time in global economic history and it’s vital that we are open to and really embrace change. Technology is allowing and enabling us to design and build new and beautiful, energy efficient homes which are built to high spec in factories. They have all the wiring, plumbing and even decorating completed in factories and can be delivered ready to assemble in just days or weeks on site.
This modern-day prefab, a designer eco pad allowing ready-made home ownership to become reality, will enable people to buy a new era ‘dream home’. They come at a fraction of the cost, and in a fraction of the time, as traditional bricks and mortar homes. As funding is piled into this new sector and our government eases planning laws to allow these new designer eco homes to be built, we will start to see the emergence of affordable housing appearing on a large scale across the UK and wider western world.
The end of pre-existing housing?
While this will be hugely beneficial to anyone wanting to get on that first rung of the property ladder, it does throw something of an elephant in the room too. What becomes of the housing stock owned by the millions of people already on the ladder?
The implications for the domestic housing market are profound. People’s homes will appear to be staggeringly expensive when compared with this new era of homes. Think about it, who wants an old, potentially energy-sapping house, when they could have a bespoke and eco-friendly home faster – at half the price?
These new-era homes are likely to cause a shift in the market and those owning a house for more than a decade will see their paper-based gains evaporate.
The danger is that anyone who has entered the market in recent years is at risk of being left with permanent negative equity as the market for pre-existing housing is eliminated. Others argue that the demise of pre-existing housing is inevitable also, but some way off.
This new era is here. There are examples of a UK off-site construction industry emerging. Legal & General has set up L&G Homes in a factory near Leeds to build up to 4,000 prefab homes a year. High-quality prefabricated technologies also have an important role to play in extending educational sites, for example with Atkins’ Lime Tree Primary Academy in Sale, Trafford – a creative and bespoke forest school design that prioritises outdoor learning.
Let’s embrace this paradigm shift as we move forward into this new world of property investment and ownership.
- Phillip Nunn is chief executive at The Blackmore Group, a Manchester-based investment house specialising in property