House Building Optimism

September 2014

House Building Optimism

Figures from Countrywide suggest that over the last nine years the UK built just one home for every 2.5 new people living in the UK. Of all the countries in Europe only Luxembourg and Switzerland built fewer homes which is a startling statistic when we are faced with an increasing population. In recent years we can point to the economic downturn as having a major contribution to this failure to build but there were also other issues such as planning complexities and lack of social housing which all played a part in the sector's underperformance.

Unfortunately when we see the economy start to improve these negative factors then play a further role in escalating house prices as a result of the scarcity of supply.

Construction Resurgence

We now may be seeing some light at the end of the tunnel, in that the latest statistics from the Department for Communities and Local Government show an 18 percent increase in new housing starts in England on the same quarter last year. New housing starts between April and June stand at 36,230 with over 137,700 over the last year which is the highest level of house building since 2007.

In addition to this welcome news the Government is said to be exploring emergency measures to further induce building in the short term as the Government were anticipating a 4 percent reduction in housebuilding next year - which clearly would be a severe embarrassment in the run up to the General Election.

Realistic Optimism

The present tendency is still to compare new numbers against one of the deepest economic troughs seen for many years and on that basis increases are always welcome news. We do however need to provide twice as many homes again every year to start to meet the pent-up demand and ensure sharp price rises are avoided. The tide now seems to be moving in the right direction. Planning changes are being made to allow current projects to get off the ground and there is a raft of acquired land yet to be developed. Lenders are playing their part in strengthening their relationships with developers to help fund the growing demand for homes.