HOUSE-price affordability is at “historically low levels” and the high cost of property is making it difficult for even Jersey’s most successful businesses to attract and retain staff, according to a new report.
The dramatic increase in prices, along with higher mortgage rates, changes in supply and the impact of planning red tape has been revealed in the Fiscal Policy Panel’s review of the housing market over the last two decades.
The panel found that the house-price index has risen by 141% since 2002 and that property prices have increased in 15 of the last 21 years.
Although the number of properties in the Island rose from 37,627 in 2001 to 48,610 in 2021, the rate of supply for new units has slowed since 2011.
And both higher mortgage rates when compared to the UK, and barriers in the planning system, such as third-party appeals, are impacting the market, according to the review.
The panel, chaired by Dame Kate Barker, warned of an uncertain future, with the possibility that earnings may outpace inflation from 2025, potentially enabling more Islanders to get onto the housing ladder.
However, home owners on fixed-rate mortgages which were set when base rates were low could be forced to cut back on spending – affecting various areas of the economy – when their deals end and they face higher monthly repayments.
“The panel’s current assumption is for earnings growth to remain lower than inflation in 2024 before outpacing inflation from 2025 onwards. Real earnings growth will enable more households to consider buying or moving property,” the panel wrote.
“Many households with fixed-rate mortgages have been protected from the initial rise in interest rates.
“However, more households will come off their fixed-rate deals over the next few years, causing some to cut back non-housing expenditure or fall into mortgage arrears, particularly if falling interest rate expectations continue to not be reflected in mortgage rates. This will have consequent effects for the rest of the economy, such as retail and hospitality.”
The panel concluded that continued high housing costs could have serious consequences for the Island, impacting recruitment and economic growth.
“Sustained productivity growth relies on a fluid job market in which the most productive firms can grow by hiring. Even the most successful businesses in Jersey are finding it increasingly difficult to attract and retain staff. This holds back their expansion, with knock-on effects for productivity, output and ultimately living standards on the Island.”
The panel added: “High housing costs are making it harder for businesses to attract and retain workers, and for young Islanders to remain in or move to the Island.
“In this context and with an ageing population, rising housing costs over the longer term will have severe consequences for the labour market and productivity in Jersey.”
