What does the government think of the housing market?

Housing is always a popular topic with the public and politicians. It’s important that homeowners and prospective homeowners understand the government’s approach to the housing market in the UK, because while we can’t predict the future, we can explore the government’s current strategy when it comes to housing and how it may affect you, and also speculate what effect any government would want the market to have on the economy and the English people.

Residential property value

Housing market values have a massive impact on England’s total wealth - if the market values move by just 10%, it can affect the total wealth of the UK by £780 billion.

The total value of residential properties in England is approximately £7.8 trillion. To put this in perspective, we spent approximately £182 billion on the NHS, £54 billion on defence and £18 billion on civil service salaries this year. When this extra wealth is liquidated by moving home, taking loans and credit cards against the equity, home improvements, etc., it generates tax in many areas such as VAT and stamp duty, but also distributes the wealth as it is spent on goods and services in England and the UK.

House prices

After a surge during the covid pandemic and then a subsequent dip, the average house price in England has increased to £310,000 as of August 2024. If property prices go up and you are a homeowner, it gives you more choice. You have the option to sell, remortgage to make home improvements, take loans against the equity for many uses, move home, distribute your equity to family members, invest in other areas, plus many more choices, all of which can generate tax for the government and wealth for the country and people. When property prices are low, the opposite happens: you don’t want to sell your house for less than you bought it for, and the benefits of remortgaging are reduced. People become stuck where they are.

If housing prices go down, homeowners have less options around selling and remortgaging because their properties are worth less. Higher house prices generate tax revenue from things like stamp duty, which helps reduce the government's financial deficit so more can be spent on crucial services. Rising house prices may also drive increased housebuilding, which has a significant impact on the economy.

New homes

Even though there are currently around 25.6 million residential properties in England, the UK has a chronic housing shortage. Estimates say Britain is short of 2.5 million homes that are needed to solve the housing crisis. To address this, Labour has pledged to ‘Get Britain Building Again’ and committed to building 1.5 million new homes, creating new towns and revamping planning systems. In order to reach this target, the government would have to build 300,000 new homes each year - more than double what was built in the last two years. In some parts of the country, it’s not just a matter of building new homes as the quality of older, run down houses is making them less attractive to buyers who don’t have the funds or desire to renovate.

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