With the number of new homes being built across the UK still significantly below the level needed to meet demand, the volume of housing stock sales and letting agents have to offer is restricted.The failure to construct enough homes means that Britain’s housing shortage has now reached crisis point, with the number of prospective buyers and renters dramatically outweighing the volume of homes on the market.
There is currently an average of 29 buyers for every available property on the market, according to Propertymark.
Nearly half of respondents to this quarter’s survey said build cost increases last year had already had a ‘significant’ impact on their businesses, while 56% said this was the number one factor adding pressure to their bottom line in Q4 2021.
The survey responses reflected a particular concern over material costs, with 65% saying that the increased cost of materials was driving the overall increase of build costs, while only 8% thought build costs were rising due to labour challenges.
Labour shortages in the UK worsened in the final quarter of 2021, with job vacancies hitting a record high of 1.2 million, more than double their level a year before, the Office for National Statistics said. Construction job vacancies stood at 42,000, slightly down from the peak in Q3 of 48,000 but just over 60% higher than Q4 2019, before the impact of the pandemic and the UK’s exit from the European Union.
Respondents to the survey were divided over whether land prices would increase or not in the first quarter of 2022. A slight majority (48%) said they thought land prices would ‘increase’ this quarter, nearly matched by the 46% who said they thought land prices would ‘decrease’.
Data from Knight Frank’s Q4 Land Index indicates that land prices held steady in the fourth quarter of the year, as house price inflation continued to offset a rise in build costs. However, house price growth is expected to moderate this year and mortgage rates are set to rise, putting more pressure on housebuilder margins.
Justin Gaze, head of residential development land at Knight Frank, said: “Rising build costs are a real concern for housebuilders large and small up and down the country. This will undoubtedly have a knock-on effect on house prices. Housebuilders will look to offset any increase in build costs by increasing prices in a market, which continues to be constrained by a lack of supply. More resources are required in an underfunded planning system if the supply of housing is to increase.”
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