The UK’s house supply crisis will get worse without stronger government intervention, the National Association of Property Buyers has warned.
According to Jonathan Rolande of the NAPB, confidence among house builders is low. “It’s hardly surprising,” he said. “There is a real possibility that property prices will shrink significantly in 2023, borrowing costs have rocketed and there are still logistical problems with labour and materials. None of this bodes well for housing and there is a risk the supply crisis will deepen in 2023.”
Supply of newly built and converted property has not kept up with demand for many years, added Rolande. “Government figures show we need at least 300,000 new properties a year,” he said. “This keeps up with demand, but does little to massively increase stock in order to suppress sky high prices. But the stark reality is that even this relatively conservative figure has not been met.
“Whilst the government argues about whether to impose ‘top down’ targets on councils or not, the real stumbling block appears not to have been seen – and that’s addressing planning laws which hold us back from boosting supply.”
Construction companies are fearful of the market, according to Rolande, and instead of building property that may not sell, they will choose to build only the sites that have a more or less guaranteed return. “Who can blame them?” he said. “As inflation gets back under some control and labour is freed up from elsewhere due to the economic contraction, costs will reduce and the situation will begin to return to normality. But we should not expect a sufficient number of new homes to be built if the profit margin simply isn’t there.”
If there is a drop in values and a slump in transactions for a long period, the country will be faced with an even more acute housing emergency in the coming years, Rolande warned. “But then the question will be about who fills the gap left by housebuilders waiting for the market to recover,” he added.
You can’t force a free market with free firms to build in an uncertain market.
What needs to happen during this downturn is reform to change what will happen coming out of it.
Planning reform and time limits is step one. Along with action to level the playing field in terms of the buying of land. When large developers can (as they do) pay out tens of millions of capital knowing they can sit tight, it prohibits smaller developers who can raise the finance, but have to build straight away. Moreover who would never pay fees to landowners for option agreements, because they can’t afford to.
Again, those larger developers can offer bigger, and move quicker to secure options on land.
They’d think twice if reform were in place on land bought for development. Reform to force building…..
Then, we need to speed up local plan development, and speed up the review process too.
And, make it easier to release greenbelt. Ultimately it has to happen. It isn’t about want, it’s about need.
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The NAPB have outlined the problems but have not outlined what action they want the Government to take. It is difficult to see what the Government can actually do. They can’t legislate to make house builders build houses. That is a commercial decision for the house builders. Blame is often laid at the feet of NIMBYS blocking planning permission for new developments. This is a bit unfair as it would be a very rare person who would welcome a housing development at the bottom of their garden or on a local beauty spot they enjoy. However, the Local Government Association said in 2021 that of the 2.78m homes approved since 2010-11, only 1.6m were actually built so maybe planning permission and land availability isn’t the problem it’s made out to be and just releasing more land is not an answer.
The house builders have the Government over a barrel. They build what they want (expensive houses) where they want to build them ( Green belt preferably). They drip feed supply to keep prices high taking years to build sites out and do their best to wriggle out of building any so called affordable houses or making any contribution to the extra infrastructure needed to support their developments. The only solution is for the Government and Councils to get building themselves. Good luck with that one!
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