UK housing shortage at crisis point?
There are over 25m homes in the UK, however it is clear that not enough new homes are being built each year. There are not enough homes to meet the demand of a growing and ageing population, and this demand has been exceeding supply levels for far too long and this will remain the status quo until appropriate measures are put into place to buck this trend.
Long term government policy has created a highly restricted supply-side, which in turn has fueled the continuous rise in house prices, and which increase at a rate greater than income levels. Even with recent fresh government commitment regarding increases in new builds and affordable housing, the trend of supply and demand imbalances are likely to continue until there is significant reform to the framework of the national planning policy.
Unfortunately, the main focus of government policy changes have been directed at demand drivers, and although this will go some way towards dampening demand and potentially having some cooling effect on house prices, it doesn't allow for a long term sustainable solution. The current initiatives of raising the stamp duty for buy-to-let and second home buyers by April is likely to have some impact on demand and prices but will also likely create a rush on the market in Q1 2016. Interest rates are again expected to rise marginally this year and this change should also add to the 'cooling off' procedure.
Although the government has acknowledged that there is a fundamental problem with supply shortages in the UK housing market, the measures proposed to solve the problem are simply papering over cracks, as these new targets still fall short of the rate of new households. Extensive supply-side reform is the only way to fully resolve the issue; this means greater investment into new build infrastructure and accessibility and an efficient system of planning which allows for faster development builds - this will also drive investment into construction capacity, via skilled labor and materials. Whilst at the same time it is the responsibility of large-scale private developers to commit to developing out their land banks at a greater pace or provide sub-development opportunities to smaller private developers - something policy reform could also change.
Written by Jamie Gray,
Managing Director, G5 Properties, [email protected]