Another year has passed and another year where the delivery of homes last year failed to live up to long-term averages. The interesting dynamic though is the move for housebuilders to bigger units therefore offering lower density on developments.
Growth in the private housing market has increased year on year and is now significantly up on the lows of 2009 yet this is underpinned by three/four bedroom homes and an ever increasingly percentage taken up by Help to Buy – currently standing at 27%.
April 2016 saw average house price increase by a marginal 0.2% - though most did expect a decrease. The monthly rise was the lowest since November and brought the year-on-year rate of increase down to 4.9%, from 5.7% in March. In London, prices were up by 13.9% over 12 months, to an average £534,785 – five and a half times the average price of a home in the north-east, which fell by 0.7% over the year to £97,581.
The UK went through a phase around ten years ago of building more apartments than houses in major cities, nowadays this has moved to more than 80% of homes being developed being houses and more interesting that in a number of cities, like Sheffield and Hull, these houses are being built in the city centre.
The house price growth over the last few years has largely been driven by London where growth has been at 75% since 2009 driven by significant lack of demand and a strong demand from buyers wanting to move into the city. Broader into the regions has a mixed bag of results largely due to the recovery from recession taking longer but most regions are now seeing positive growth, although nowhere near the levels London has experienced.
The perfect storm though has materialised for most regions. Economic growth has largely returned to most areas in the UK coupled with mortgage rates still being relatively low, Help to Buy is supporting those first time buyers who need a hand with a deposit and then to top it off the price-to-earnings measure is broadly in line with the long-run average. Why wouldn’t people want to buy a house – let’s deep dive and take a look at five key areas:
1. Conservatives made a pledge to build
1,000,000 homes by 2020 and they simply are behind the target. Help to Buy was
introduced to encourage house builders to build – it has, look at how well
house builders are doing – but it is now allowing people to buy houses they
cannot afford.
2. Starter homes are being introduced – 20%
discount to market price (so basically the price they should be rather than the
inflated price) – the sector that needs housing is social housing, support
this. You have to wonder how the 20% reduction will be addressed – how will
costs be cut to ensure some profitability on the site.
3. Private rental sector – well what to say,
reduced tax breaks, stamp duty surcharges and much more means although PRS is
encouraged it is also becoming a costly business yet it was the safety net for
so many providing housing solutions to those unable to buy.
4. Planning – short and sweet – it does feel
to have got slightly better but more can be done to improve efficiency and
reduce red tape.
5. The government wanted to introduce
innovation into home buying – erm…still waiting. There has been improvements
and I’ve met a few businesses that they themselves are making improvements not
through anything the government has done though.
So to sum it up we see ourselves with a housing market that is faltering on delivery, failing completely on private rental sector, sort of helping first time buyers but could do much more and completely failed on introducing innovation into the housing market like it promised.
Feel free to contact me 0113 288 2276
or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to
property and construction.
Enjoy your week
Lee
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