George Osborne, before he reinvented himself as Rambo, when he was still the ‘austerity chancellor’, committed Theresa May’s government to spending a huge sum to prop up the housing market. The combined total of grants, loans and guarantees devoted to helping developers and homebuyers is set to exceed £42 billion between now and 2020 (similar to the cost of building four new Trident submarines). It’s supposed to achieve two things: build a million new homes and double the number of first-time buyers. An equally important but unstated priority is ensuring that house prices continue to rise. After the EU referendum, all three targets look much tougher.
Brexit already appears to have hit house prices, which – outside London and the south-east – have not yet recovered from the post-2007 slump. Osborne was desperate to create more market activity, but while the number of new mortgages has grown since 2010 (especially for buy-to-let landlords), there are still only about 600,000 first-time buyers a year compared with 800,000 a decade ago. Over the same period, the number of households with mortgages has dropped by almost two million, the fall especially marked among younger age groups.
Osborne might take the credit for a mild recovery in house-building: it grew by one-third in five years, a rate of increase that would bring the government close to its target of a million new homes in this parliament. In March, the big house builders endorsed the government’s aim. But their share prices plunged after the referendum and have only partially recovered, with some already announcing cuts in output.