Post Brexit vote: all eyes on new home building
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.