Figures from the Office for National Statistics reveal a sharp rise in housebuilding starts in April to June of this year, with 51,730 homes under construction.
However, the increase came after a major slump in construction levels during the Covid pandemic (2020 to 2021) when the drop in housebuilding levels was on a par with the 2008 financial crisis that adversely affected housebuilders and the housing market. Net increase in dwellings in the UK dropped 11% in 2021-2020 compared to 2019-2020 as construction recovers following the Covid-19 pandemic.
The latest figures show that the number of completed homes rose 6% compared to April, May and June last year, to 44,940. This was also a 3% increase on the previous quarter.
Despite the improvement in housebuilding levels, the volume of new build homes being delivered continues to fall well below the UK government’s target to develop 300,000 homes each year.
The shortage of housing stock continues to place upward pressure on house prices in many parts of the country.
Residential property prices increased by 15.5% in July, according to the ONS, although analysts expect price growth to ease in the coming months.
Rhys Schofield, managing director at mortgage broker Peak Money, commented: “If you cut through the numbers that look big on paper, the UK needs to build 340,000 new homes a year until 2031. The Government’s own target is 300,000 a year.
“These latest numbers all fall well short, meaning that house prices can only be forced in one direction. With the lack of urgency around housebuilding, having a place to call your home is becoming increasingly out of reach for many people.”
The price of construction materials in the UK is also thought to be having a negative impact on the housebuilding sector. UK construction materials prices in July 2022 were 24.1% higher than a year earlier, according to the ONS.
Edgar Rayo, chief economist at property finance company Finanze, commented: “These newly released figures highlight the build-cost inflation battering the industry.
“Soaring construction costs brought about by supply chain issues and fuel price hikes continue to squeeze the profit margins of the UK’s property developers.
“As we track the imbalance in the housing market, we still observe the very high demand for housing, which continues to put pressure on prices.”