This chart tells you everything you need to know about what's wrong with the UK housing market

The OECD has released its latest survey of the UK economy and here’s one thing it found — the UK housing market is messed up.

And here’s why: Since the 1970 the total number of houses has been falling sharply while the total population of the UK has been moving in the other direction. This has meant that the supply of housing is struggling to keep up with demand, driving prices upwards.

Despite efforts by the government to improve affordability of housing, the majority of the effect has been an increase in the number of property transactions rather than the hoped increase in the supply of houses. As the report states:

“Credit constraints have been partly addressed by the Help to Buy and Funding for Lending programmes, which seem to have been effective at reviving lending to households and strengthened housing demand. However, housing supply has not risen to

meet demand.”

Low supply and increased transactions have helped to boost house prices at such a pace that the OECD warns it could “create risks to financial stability in the case of a downward adjustment”. What this means is that if there was a sharp fall in house prices from these levels it could quickly put borrowers into difficulty and lenders would struggle to recoup their losses by selling the properties.

The UK’s weakened financial system could ill afford such a shock at this juncture.

In response, the report recommends a number of measures. It suggests reviewing the land set aside for the Green Belt to open additional land up for development and suggests that the government invest in building new social housing to alleviate some of the pressure being built up in the system.

In other words, we need to build more houses.

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