August 14, 2023 - 7:00am

Recent statistics released by both the official census and Zoopla show that more young people are giving up on buying property than ever before. Around 51% of people in England and Wales between the ages of 20 and 24 are opting to live with their parents, a seven-point increase on similar figures collected in 2011. More than 10% of people aged 30 to 34 are also living with their parents, up from 8.6% in 2011.

The fact that the comparison is being made to 2011 is interesting. Back then, property prices had not yet recovered from the bursting of the bubble in 2007-08 and were almost 12% below the peak. Today, house prices are 73% above their 2011 levels, so it is no wonder that more young people are opting against moving out.

These numbers alert us to a fact that is not widely discussed when people talk about the housing crisis in Britain: the market is highly cyclical. Prices do not constantly rise. Rather, they go up and down, typically in line with the economic cycle. When the economy is growing, prices rise; when it slides into recession, they fall.

This cyclicality suggests that the question of the housing crisis is much more complicated than simply being a case of restricted supply — a constant refrain of the politicians and the building lobby. 

Take, for example, vacancies. In 2022 there were 676,304 vacant dwellings in England. This number has increased by over 86,000 since 2013, when house prices were lower. These are enormous numbers. Data shows that in 2022, 204,530 dwellings were built in the entire UK. This means that the number of vacant dwellings in England alone is equivalent to over three years’ worth of building.

If this is a supply-side crisis, it is a rather odd-looking one. The reality is that Britain does not suffer from a housing shortage: rather, housing is currently too expensive because it is treated as an investment asset.

This is why the price fluctuates with the business cycle. When confidence collapses, so too do prices. Confidence in turn is driven by the Bank of England’s monetary policy, which impacts the housing market directly through its influence on mortgage rates.

Indeed, prices are already falling due to rising interest rates. Eventually the fall in these prices will lead to a collapse in construction employment and this will lead the economy into recession. Then, the debate will turn away from high house prices and towards unemployment. Headlines will tell us that young people are living with Mum and Dad not because of unaffordable housing, but because they cannot find work.

If all this seems remarkably familiar it is because similar occurred during the last recession in 2008-09. The problems presented by the overly financialised economy in which we live render us like Sisyphus. We roll the rock up the hill, discussing housing in the boom and unemployment in the bust. But when one of these problems is solved, the other pops back up — after all, it is simply the reverse side of the coin. And so the rock rolls right back down the hill again. 

We can never get a grip on these issues because they present a moving target. Since politicians and policymakers are convinced that the problems are caused by housing supply, they never even try to get to the root of the problem. The philosopher Friedrich Nietzsche once asked whether a man could be happy to repeat the same life repeatedly. In Britain, we don’t seem to get a choice. Our economic problems are an eternal recurrence of the same. 

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics