FOCUS: Demand outstrips supply as property prices go through the roof

Tuesday 13 April 2021

There are almost 200 eligible households on the GHA's waiting list, as demand massively outstrips supply amid strong suspicions that Guernsey's population has grown in the last 12 months.

The average Local Market house now costs £550,000, following an unrelenting rise in property prices. 2020 saw the largest annual rise (11.8%) since 2008, while Open Market activity has also boomed to pre-financial crisis levels.

The Guernsey Housing Association recently opened its 1,000th home. Formed in 2007, the association's partial ownership homes are designed to be a "stepping-stone" on the way to property ownership. 

However, escalating prices in the private market are turning a basic right into an unreachable ideal for many. Guernsey's affordable housing crisis has worsened during the pandemic, with thousands of people facing reduced wages while the cost of living continues remorselessly on an upward trajectory. 

"We have to remember that many people are in jobs that do not have increasing pay each year," said GHA Chief Executive Officer Steve Williams. "So partial owners may stay for a few years and build up some value equity and move to the private sector, and others will stay far longer due to their restricted finances.

"In February 2021 we had 185 households on our waiting list. These are all applicants who have been checked and are all eligible. 12 months ago we had 115 applicants, so you can see the demand has gone up significantly in the last year."

Pictured: Since 2007, the GHA has sold 245 partial ownership properties to locally qualified people unable to afford to buy a home. 33 of those have sold the  property back - having staircased to a higher percentage of ownership - and bought privately.

Since 'Lockdown 1' started in March 2020, Mr Williams said there has been widespread recognition of a "fundamental change" in the housing market. Average transaction price increases of 11.8% are just one element of that. 

"In June, following release from Lockdown 1, the ‘for sale’ market, the private rented market, and the social housing market have all had increased demand and shortage of supply.

"Probably because Guernsey has handled the pandemic extremely well, the island has been seen as a relatively safe haven and people with a local qualification have returned to the island," he suggested.

"Hence, I suspect the population has grown. There has to be more households in the island chasing homes, to explain how all sectors of the housing market are busy." 

Pictured: Partial ownership mortgages are 100%, there is no Document Duty (as the GHA sells 125 year leases) and no Court fees.

He suspects that is linked to both the financial and emotional strain of lockdown. Since Guernsey's second lockdown, there have already been signs that the housing market continues to soar unsustainably, a trend that is being witnessed across the British Isles. 

"Lockdown 1 may have led to more young people wanting to live separately from their parents, and potentially more relationship break-ups, meaning more households and more demand," Mr Williams said of the surge in property sales last year. 

"Inevitably, some of the lower income earners will be left behind if prices remain strong," he warned. "This is undoubtedly one of the main reasons why our partial ownership waiting list has risen so swiftly in this last 12 months."

Those trends are easy to spot. Identifying solutions is more problematic. For the GHA's waiting list, the simple answer is to provide more partial ownership properties, however the reality is that increasing that property portfolio takes time and money. 

Despite strong support from the Employment & Social Security Committee, Mr Williams said it takes several years to obtain land with suitable planning permissions. It is a lengthy process that makes it "challenging to react swiftly enough" to a rapidly-changing housing market. 

At the moment, the association is constructing 20 properties across three developments, in St Martin’s and St Peter Port. Unfortunately, it will make only a small dent in the GHA's growing waiting lists, which are expected to increase again in the meantime. 

Pictured: Applicants can buy between 40% and 80% of the value of a GHA property. In addition there is a subsidised rent payable to GHA for the % the association still owns, plus a service charge for any communal costs. 

"We are not in a position to offer anything overnight," Mr Williams conceded. "The best option for GHA working with States Housing is to secure more land and fund building more partial ownership, and rented, housing as quickly as we can. By increasing supply of new homes it does not inflate prices."

He warned against quick-fix solutions which could damage affordability further. 

"The danger is that if the States were to offer first-time buyer financial assistance to buy homes then it will only increase demand and house prices will rise even faster, making it even less affordable," he said. 

"Any government intervention in the housing market, particularly a market as small as Guernsey’s, has to be thought through in advance very carefully before taking any action."