Impact of Britain’s Labour Market and Housing Supply on House Prices: Expert Insights

The housing market in the UK is a topic of hot debate, with experts weighing in on the factors that are currently driving high house prices. According to Simon Rubinsohn of the Royal Institution of Chartered Surveyors, the strength of Britain’s labour market is a key difference between historic house price crashes and the current situation.

Rubinsohn points out that after the downturn in the early 1990s, high unemployment rates played a significant role in driving down house prices. However, in today’s market, unemployment remains low, providing a cushion against a potential housing crunch. Banks have also adjusted their behavior, offering escape routes for mortgage owners facing difficulties.

Despite the relatively stable employment situation, house prices continue to rise due to a lack of supply. Robert Colvile, director of the Centre for Policy Studies, notes that the UK has not built enough homes, especially in high demand areas like London and the South East. The Centre for Cities estimates that Britain has built significantly fewer homes than the average European country due to its broken planning system.

While interest rates play a role in driving short-term market trends, the long-term issue of housing supply remains a crucial factor in keeping prices high. Experts agree that without significant changes in the UK’s housing policies and planning system, the trend of rising house prices is likely to continue.