The government remains committed to building more new homes, but their target of 300,000 a year is unlikely to be met.
Sky-high house prices, fundamentally caused by a chronic housing shortage, have created a broken housing market which makes the cost of living in many parts of the UK harder than ever.
The failure to construct enough homes means that Britain’s housing shortage has reached crisis point as the number of prospective buyers, albeit currently at an historic low, continues to outweigh the volume of homes on the market, placing upward pressure on house prices, which is leaving many people with little alternative but to turn to the PRS for accommodation.
Given the supply-demand imbalance in this country, it is clear that we are faced with a crisis, and that is why Theresa May this week delivered a speech at the National Housing Federation conference about erasing the stigma attached to social housing and the need to boost the supply of low-cost homes.
The prime minister has pledged to provide housing associations with £2bn in new funding to help them build more affordable homes.
She told the conference of the National Housing Federation, which represents housing associations, that “the most ambitious” providers will be able to bid for government money to last them until 2028-29.
Ben Denton, managing director of Legal & General Affordable Homes, commented: “We are pleased that the government has announced increased funding towards affordable housing today. This will help to deliver more homes at levels that residents can afford in areas which need it most.”
The government’s pro-housebuilding stance has helped push up the number of new homes registered across the UK, and this latest announcement by the PM should help further increase the number of new build properties, helping to ease high demand for housing.
But the volume of new homes being delivered remains significantly below the government target of 300,000 new homes a year.
Knight Frank’s latest annual Housebuilding report states that 86% of housebuilders believe construction of 250,000 additional homes a year is the maximum achievable amount by 2022.
Just 1% of respondents, which include more than 100 developers that account for almost three quarters of all newly-built homes across the country each year, think surpassing 300,000 additional homes each year is possible by 2022.
David Fenton, head of regional land at Knight Frank, commented, “Nationwide, housebuilding looks set to increase, underpinned by more evenly distributed house price growth and high levels of employment in regional cities.
“However, our survey indicates that scepticism prevails among housebuilders over whether it’s possible to deliver 300,000 additional homes a year, and ultimately they will only build what they can sell.”
There is plenty of speculation that house prices will fall, owed in part to Brexit, and yet the latest data from the Office for National Statistics (ONS) shows that UK property prices grew from June to July, albeit at a reduced rate of 1.2%.
The reality is that the fundamentals that drove house prices higher remain the same, with demand continuing to outweigh supply.
With housebuilders failing to deliver anywhere near the number of homes needed in this country, property prices - and rents - will inevitably rise further in the medium- to long-term, even if there is a dip in the short-term.