Digging Deeper – UK 2020-Based Interim Population Projections

Increase of 167,000 People Per Year Over The Next Twenty Years

Much Lower Projected Growth Than Previous 2018-Based Projections

Higher Net Migration Not Enough To Offset Negative Natural Change

4.5 Million More People Aged 60+ by 2040

The latest ONS population projections show continued population growth across the UK though at a much lower rate than in the previous 2018-based projections. The new 2020-based interim projections show an increase of 167,000 people per year over the next twenty years. However, this reflects much higher growth during the first five years (245,000 p.a.) than the following fifteen years (141,000 p.a.) as net migration is projected to fall slightly and natural change (births less deaths) is projected to turn negative from 2025.

As Figure 1 shows, these latest interim projections continue the trend of lower growth since the 2008-based projections. Figure 1 also highlights the challenges in projecting future population changes. Recent trends are not always indicative of what will happen in the future and even when we appear to get it right (e.g. 1975), it’s not always for the right reasons. The 2020-based interim projections are particularly subject to uncertainty given the unknown impacts of the pandemic. The release of 2021 Census data should improve the next version of population projections (2021-based) due to be published in 2023.

The new 2020-based projections project lower total population growth than the previous 2016-based and 2018-based projections. Net migration is expected to be higher in the latest projections with 4.2 million people over the next 20 years compared to 3.9 million in the 2018-based projections. However, the latest projections are based on a much lower number of births and slightly higher number of deaths. The net result of this is a negative natural change (-0.9 million compared to 0.7 million). The overall impact of the slightly higher net migration projection and negative natural change projection is to reduce the total change over the next 20 years by 1.3 million people.

The ageing population is a massive challenge for not just the housing market but also society as a whole. The new 2020-based interim projections show that the number of people aged 60 and above is expected to rise from 16.4 million in 2020 to 20.9 million in 2040 (Figure 3). While this is a massive 28% increase (4.5 million people), most of them are already housed appropriately. The biggest challenge will be in balancing their care needs against the housing needs of younger and typically less wealthy generations.

Previous Versions

Digging Deeper – The Death of the Buy-to-Let Mortgage

Booms, Busts, and Tax Changes

Not Dead Yet

More Data Please

The buy-to-let (BTL) mortgage was a key feature of the UK’s housing market in the late 1990s and 2000s. But the last few years have been much tougher for BTL investors and their lenders. There are regular reports suggesting large numbers of landlords are ready to sell up thanks to tighter taxation and tougher regulations. If these reports are true, this would suggest the death of the BTL mortgage. However, while the heady days of the 2000s are long gone, the BTL mortgage still plays a key part in today’s housing market. Unfortunately, our understanding of the exact role of the buy-to-let mortgage in the housing market is compromised by a lack of publicly available data.

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Digging Deeper – The Problem With The New-Build Premium

The new-build market has a mortgage problem. Mortgage lenders are less willing to lend at high loan-to-value ratios on new-build homes than existing ones. They have concerns over the pricing of new-build and how well the price of a new home will hold relative to the market over time. Our analysis looks to investigate whether these concerns are appropriate, the role of the Help to Buy equity loan scheme in bridging the gap between lenders’ concerns and market demand, and what might happen to the new-build market when Help to Buy ends.

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Digging Deeper – Unbuilt Planning Permissions

Calculations suggesting there are over one million unbuilt planning permissions are too simplistic and don’t accurately reflect the realities of planning and housebuilding. Regular analysis comparing the number of new planning permissions and housebuilding completions suggests there are over one million homes with permission but unbuilt in England. The latest analysis is by the Local Government Association (LGA) and suggests that “More than 1.1 million homes granted planning permission in England in the last decade are yet to be built”. This is regularly cited as evidence of developer land banking and that the planning system is not a barrier to housebuilding. Unfortunately, the result is probably too high due to poor data and an overly simplistic calculation.

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Digging Deeper – Land Reg Lag & Coronavirus

Pandemic Leading to Longer Time Lags in Registration

Creates Problems With Short-Term Data & House Price Indices

There has always been a time lag in when transactions are registered with HM Land Registry but the pandemic has increased it. The increased lag creates a short-term constraint on our understanding of the housing market with less comprehensive transaction data and could lead to larger revisions in the ONS house price index.

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Digging Deeper – High Loan-to-Value Mortgage Lending

Attempts To Solve Constrained Deposit Affordability

Raises Tensions Between Policy Markers And Financial Regulators

A Challenge in Expensive Markets & Will Not Help As Many As Intended

Last week the Prime Minister re-announced the government’s plan to turn “generation rent into generation buy”. This will apparently be achieved by increasing the availability of high loan-to-value (LTV) mortgages with long-term fixed rates. There’s still a lack of detail of how this will work in practice beyond the original Centre for Policy Studies report (PDF) but this note looks at the challenges facing potential first time buyers (FTB) and what impact this proposal could have.

There are three big barriers preventing potential FTBs accessing homeownership at the moment: the unaffordability of housing relative to incomes, the impact of financial regulation following the credit crunch, and the threat of a housing downturn due to the economic consequences of COVID-19 (& Brexit?). However, they all contribute to a single big problem – the need for a large deposit to buy your first home

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