Post Brexit vote: all eyes on new home build­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

It now seems clear that there is un­likely to be a sud­den, dras­tic drop off in the UK hous­ing mar­ket as a re­sult of the Brexit vote with the lat­est in­dices show­ing ac­tiv­ity down slightly but noth­ing that won’t bounce back.

This leaves the cur­rent short­age of hous­ing as the ma­jor is­sue likely to af­fect the mar­ket and there is some wor­ry­ing re­search around sug­gest­ing that the like­li­hood of reach­ing the tar­get of a mil­lion new homes by 2020 looks hard to achieve.

In­deed, in Eng­land for ex­am­ple, it is sug­gested that the short­age is set to be­come more acute due to the de­ci­sion to leave the Euro­pean Union with cur­rent lev­els at 30% be­low those recorded be­fore the eco­nomic down­turn in 2008.

Rec­om­men­da­tions put for­ward by the Barker Re­view of hous­ing sup­ply in 2004 that 270,000 new homes should be built ev­ery year have never been met, ac­cord­ing to a new re­port from the York­shire Build­ing So­ci­ety.

It means that the coun­try has missed its house build­ing tar­gets by al­most 1.2 mil­lion since 2004. And de­spite the gov­ern­ment pledg­ing in 2015 to build a mil­lion homes by 2020, only 142,890 were built in 2015 as a whole, 29% less than the 200,000 homes needed per year to reach the one mil­lion tar­get by 2020.

This comes on top of a new re­port from the House of Lords Eco­nomic Af­fairs Com­mit­tee which said that the UK gov­ern­ment needs to in­crease its home build­ing tar­get by 50% and build 300,000 new homes each year to tackle the cur­rent hous­ing cri­sis.

The re­port sug­gests that lo­cal au­thor­i­ties and hous­ing as­so­ci­a­tions must be freed to build sub­stan­tial num­bers of homes for rent and for sale and points out that the cur­rent tar­gets will fail to meet the de­mand for new homes or mod­er­ate the rate of house price in­creases.

It also said that cur­rent pol­icy is re­strict­ing lo­cal au­thor­i­ties’ ac­cess to fund­ing to build more so­cial hous­ing and cre­at­ing un­cer­tainty in the al­ready dys­func­tional hous­ing mar­ket by fre­quent changes to tax rules and sub­si­dies for house pur­chases, re­duc­tions in so­cial rents, and the ex­ten­sion of the Right to Buy.

This comes at a time when re­search also shows that fewer prop­er­ties are be­ing listed, so there are fewer homes avail­able to buy. While some of this is un­doubt­edly due to un­cer­tainty sur­round­ing Brexit, it means that build­ing new homes is even more im­por­tant to sort out the acute sup­ply and de­mand dis­par­ity.

More new homes are needed now more than ever. But the UK’s big­gest house builder, Bar­ratt, has sig­nalled that it could slow its pace of con­struc­tion in light of Brexit. The builder told the Reuters news agency it would also re­view its com­mit­ments of land on which to build, af­ter the UK voted to leave the EU. This is de­spite the home builder in­creas­ing new prop­erty com­ple­tions by 5% last year.

What is clear is that far fewer than the tar­geted 200,000 new homes are be­ing built each year and this has helped keep prices high which in turn means that first-time buy­ers are still priced out of the mar­ket and this slows the hous­ing lad­der. Brexit is hap­pen­ing and now we need to move on and get on with more build­ing, other­wise the mar­ket will slow more than it needs to.

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