Every drop counts to help the housing famine
According to the House Builders Federation, a shortfall
of UK homes is causing a housing crisis. A third of men and a fifth
of women aged 20-34 are living with parents; nearly five million
people are on local authority waiting lists and the average age for
a ftb is 37. Laura Edgecumbe-Ansdell investigates
More homes needed in the UK
The Federation of Master Builders (FMB) claims less than half the
new homes needed in the UK are being built, and this situation may
deteriorate following government austerity measures.
The Royal Institute of Chartered Surveyors (RICS) says:
"Critically, we suspect that housing starts this year will amount
to around 110,000, and the number for next year will be little
higher. With demographics arguing for more than double this
total on the most recent analysis, the prospect of a medium-term
shortfall of good quality homes is a very real concern."
Why? Rising population
According to the Office of National Statistics, the UK population
will increase by 4.3 million by 2018. This is due to natural
increase (more births than deaths) and because there are more
immigrants than emigrants. The UK also has an ageing population,
with the percentage aged 65 and over projected to increase from 16%
in 2008 to 23% by 2033.
Increase in number of households
The housing demographics are changing, too, as people increasingly
live alone and own more than one property. According to the
Department for Communities & Local Government (CLG), the number
of English households will grow to 27.8 million in 2031. The south
east region alone will see a growth of 39,000 households per year
from 2006 to 2031.
Shortage in supply
Despite these increases, fewer homes are being built to meet the
extra demand.
According to the House Builders Federation (HBF), last year saw
the fewest new homes built (second world war years apart) since
1923; and the Office for National Statistics (ONS) revealed that
the value of new construction orders on private and government
housing slumped 23% between the first and second quarters of
2010.
Why the lack of house building?
A gloomy housing market
House building was badly hit during the recession, with falling
property prices and low consumer confidence. This means profits are
down for many developers, and they do not have the money to invest
in new projects.
Economic factors
Howard Archer, chief European and UK economist for analysts IHS
Global Insight, says: "On balance, while we believe that a sharp
correction in house prices is unlikely, we do expect them to soften
by around 3% over the final months of 2010. Furthermore, it is hard
at this stage to be optimistic about house prices in 2011 as the
fiscal squeeze will increasingly kick in, which will hit people's
pockets and lead to serious job losses in the public sector."
Archer believes that house prices could be 10% lower by the end of
2011. As a result of predicted house price falls, many house
builders are scaling back plans to build.
Government policy
Many commentators believe government planning and housing policy
is not helping. Property developers claim uncertainty over new
planning rules makes it too risky for them to invest in new
projects.
Founder and chairman of Redrow Steve Morgan has criticised the
'Nimbyist charter' of the new government's planning law changes,
which make it easier for local residents to overturn planning
applications.
And many developers do not believe that Housing Minister Grant
Shapp's proposal to offer a 'New Homes Bonus' to councils to
encourage house building will be enough to incentivise communities
to agree to much needed new homes.
The housing industry has also been lobbying government not to axe
home-buying assistance through schemes such as HomeBuy Direct. Some
HomeBuy Direct schemes closed in September, and there is concern
that funding won't be renewed in the long term.
Looking ahead
The RICS suggests that only 160,000 properties are currently being
completed per year, well below the 240,000 required to keep up with
demand for the next 20 years.
Brian Berry, FMB director of external affairs, thinks the
prospects aren't looking good for the next year because of cuts in
government spending projects and because people are finding it
difficult to secure a mortgage.
And looking longer term, the shortage may worsen further. Yolande
Barnes of estate agents Savills believes the UK could face a total
shortfall of 1.138 million homes within six years.
Impact on first time buyers
Greater demand for property and less stock inevitably leads to
higher prices in the long term. In the past 20 years house prices
have risen at three times the rate of inflation, pricing more
people, particularly ftbs out of the market. The problem is most
acute in areas where demand greatly outstrips supply such as London
and the south east. For ftbs looking to get on to the ladder this
means increased competition for property and higher prices.
However, for those who do get on the ladder now while prices are
relatively subdued, their investment is likely to grow.
What should ftbs do now?
Though house prices are set to slow this year, in the long term
supply is unlikely to meet demand, and competition for housing will
increase.
With the current slowdown, good interest rates, stamp duty holiday
and offers from developers, there is an excellent window of
opportunity for ftbs to get on the ladder.
Many ftbs may believe that buying is unrealistic as deposit
requirements remain so high. However, you may be surprised at what
you can realistically afford.
Look at affordable and shared ownership options to ftbs
such as:
New Build HomeBuy - a shared ownership option that offers new
homes for sale on a part buy, part rent basis.
HomeBuy Direct - offers equity loans towards the purchase of new
build homes (still available in selected developments).
Rent to HomeBuy - offers new build homes to rent for a
pre-defined period with the expectation that you will part buy the
property at the end of this period.
Go to www.homebuy.co.uk for information about
affordable housing options and to search your local Homebuy
Agent.
To search a database of 85% of new homes on the market, go to www.smartnewhomes.com.