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4. Summary and conclusions
In summary, a number of key conclusions appear to arise from the simulation exercise:
- House prices and affordability measures are relatively difficult to change markedly through policies designed to increase the level of net additions. However, some improvements in affordability appear to be possible. The scenario 2 simulation results suggest that raising new-build output levels from 25,000 to 35,000 per year will have an impact on affordability, reducing the price to income ratio from 6.8 to 6.2, or from 5.4 to 4.9 in terms of the lower quartile of prices and incomes.
- The outcomes vary significantly within Scotland. In particular, improving affordability through supply side policies appears to be easier to achieve in Ayrshire, Glasgow city region and Dundee and Tayside. Improving affordability in the Edinburgh city region, in particular, appears to be more difficult and the results are suggestive that a stronger rise in new-build completions would be necessary to make much of an impact on affordability. There appears to be a strong case for carefully considering where, in Scotland, any increase in new-build supply is concentrated rather than spreading the rise in completions equally.
- The timing of any rise in levels of new-build completions is important. In the early part of the simulation period, affordability is predicted to improve even without a great deal of change in the level of new-build completions. Affordability then begins to revert back to its current levels in the middle, and towards the end, of the simulation period. The results are suggestive that the desirability of increasing levels of new-build completions reaches a peak in the 2017-2021 period and beyond.
- Rates of owner occupation are predicted to rise significantly during the simulation period, but not much of this can be ascribed to predicted change in house prices arising from policy measures. It is possible that further fine tuning of simulation scenarios (for example, to concentrate higher levels of completions in certain sub-regions) would yield different outcomes.
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