It would appear the old European order in housing markets has changed quite substantially while we weren’t looking. As housing markets become more similar at an international level, the local and sectoral differences within nations are becoming more important and more pronounced.

It is always a little bit shocking to find truths you have held dear for decades are actually wrong – so I have been shaken this quarter to find that not everything in the eurozone is as thought. Most media reports have for years painted a picture of very different markets across the continent. They usually suggest the UK is exceptional in the way it is structured and behaves. We have come to accept the popular wisdom that “an Englishman’s home is his castle” and, unlike our European cousins, that we are a nation of homeowners.

Remarkably similar

Not so. It turns out the UK is much more like Europe than we thought. While the recent experience of boom-bust has differed between countries, owner-occupation rates and average house prices have converged. We are now remarkably similar to other countries in Europe in terms of typical house prices and rates of owner occupation (which are now actually below the EU average).

As international markets adjust to the new realities of finance and affordability, it would seem that sub-regional geographies vary far more within nations than between nations. This means that average prices are becoming increasingly meaningless and conceal a huge range of different experiences.

Within Europe, the world cities of London and Paris have been behaving more like each other than like other regions in the same country. Prime international markets across the globe have more in common than those cities have with their provinces.

In the UK, we have long emphasised the likely different outcomes between northern regions and the London-dominated South.

Local diversity

All this has important implications for clients seeking to develop and invest under a wide range of different local circumstances. We have never had to look more closely at local demographics, economics and the migration of equity in order to assess future demand and viability.

All this local diversity means there never was a worse time to be looking at ‘one size fits all’ policies to stimulate housing construction, private renting or regeneration. The issues for Newcastle are very different to Newbury’s and different again to Newham where even East London is proving a very different market to West London.

Government review bodies such as Montague are going to have to be well versed in the complexities of the market to make their informed recommendations. Lobby groups increasingly have to understand their position in a complex firmament of other interests in order to advocate effective interventions. And everyone interested in improving housing supply and affordability will need to be open to a wide variety of potential solutions to make this happen.

Taken from
Residential Property Focus Q3 2012