Brick shortage driving up house prices

Mortgage Introducer

August 25, 2016

Brick

A shortage of bricks is a contributing factor in rising house prices in the UK over the past decade with 1.4 billion needed to meet demand, according to research from the National Association of Estate Agents (NAEA) and the Centre for Economics and Business Research (Cebr).

The UK’s construction sector would require a total of 1.4 billion bricks in order to resolve the housing shortage in the UK, the equivalent of the total amount which would be needed to build all the houses in Leicestershire.

The research report says that between 2006 and 2016, the growing UK population triggered exponential growth in demand, and has now outgrown the number of houses being built. Given that in 2016 the average UK home is made up of 5,180 bricks, resolving the housing shortage of 264,000 units would require 1.4 billion bricks.

While house prices are impacted by numerous macroeconomic factors, they are fundamentally driven by the supply and demand of housing units. The shortage of homes has led to sharp house price appreciation and prevented many prospective buyers from getting on to the property ladder.

The 1.4 billion bricks deficit could in theory build several of the UK’s famous landmarks several times over including 740 Big Bens, 40 Tower Bridges, 3,090 Manchester Town Halls, 4,540 Warwick Castles and 5,830 Conwy Castles.

There are concerns that the impact of Brexit could significantly worsen the issue. In 2015 some 85% of all imported clay and cement which are primary brick components, came from the European Union and the report suggests that depending on how trade negotiations develop, Brexit could have a considerable impact on supply.

It also explains that the UK’s brick stock steadily declined between 2008 and 2013 and only partially recovered in 2014 and 2015. Two thirds of small and medium sized construction businesses faced a two month wait for new brick orders last year, with almost a quarter waiting for up to four months and 16% waiting six to eight months.

This can partially be explained by the slowdown in building following the recession, it adds, but even although new homes are becoming smaller there are still not enough bricks. Over the past 100 years, the size of the average UK home has shrunk significantly. In the 1920s the average dwelling was 153 square meters and now it is approximately half the size at 83 square meter, meaning homes have shrunk by 46% in the last century.

This is partly a result of the fact families are generally smaller, so require less space, however the decrease can also be explained by financial restrictions. As house prices have risen by 45% over the past 10 years house buyers have been forced to settle for smaller properties.

Indeed, in the last decade the average UK home has shrunk by 9% or 228 bricks. In 2006, the average UK home was 91 square meters in size and required a total of 5,408 bricks. Now, as the size of homes have reduced, the average new home requires 5,180 bricks but there still are not enough to meet demand to fill the housing deficit.

Mark Hayward, NAEA managing director, said: “We all know that the massive lack of supply in housing is an issue that needs resolving urgently. As well as freeing up more land to ensure we can build the right sort of houses in the right places, it’s crucial we have the right materials and skills to do so.

“It seems a simple consideration but the fact that we don’t have enough bricks to meet demand has a very real effect and holds up the process from beginning to end. We’re concerned that the impact of the EU referendum means this problem could get worse as we rely on the import of brick components from the EU and of course many of our skilled labourers come from there too.”

The report also says that alongside the shortage of bricks, a skills shortage in the UK has also restricted house building as construction based jobs are decreasing in popularity. This is a result of house building slowing down during the recession, prompting workers to find alternative careers, and many choosing not to return when the market recovered.

It suggests that the recent vote to leave the EU may impose greater restrictions on foreign workers coming into the UK, which could also compromise the UK’s ability to build homes. Additionally, fewer young people are obtaining the training necessary to fill roles in the field so trade bodies are now calling for government incentives to make construction apprenticeships more attractive.

Hayward added: “The UK housing market is in crisis, with young buyers unable to get on the ladder, and families continuing to live in houses they’ve outgrown for longer than traditionally they would have had to. Houses may be getting smaller but we are needing to build more of them than ever so ultimately our needs for bricks is greater than before.

“We need investment in the sector to boost production, and house building needs an image overhaul, to become a more attractive career prospect for school leavers and graduates. Until this is addressed, we might as well resign ourselves to a life time of astronomical prices and falling levels of home ownership.”

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