A shortage of housing supply is not the primary cause of rising house prices according to the Redfern Review published today.
The review, conducted by the chief executive of major housebuilder Taylor Wimpey Pete Redfern, instead concluded that the house price boom was caused by rising household incomes and employment combined with falling interest rates.
The report read: “New household formation and supply have been broadly in balance over the last 20 years and therefore the significant increases in house prices over that period have not been driven primarily by supply constraints.”
It stated that even if 300,000 homes were built in a single year this would only reduce house prices by around 0.6%.
In order to meet demand for housing the report recommended for a long-term 20 year increase in supply.
Charles Haresnape, group managing director for mortgages at Aldermore, said: “Where the Redfern Review pinpoints the start of the house price boom in 1996, it is notable that in the six years leading up to the boom, annual house building numbers fell almost 25%, down from 242,360 a year in 1989.
“To diminish the role that decades of housing undersupply has had on prices and a market where our own research has found that almost a quarter of respondents were not planning to ever own a house is to bypass the major issue most see in the industry. If there are no ‘short-term’ solutions to the undersupply of housing, it is because the problem of under-construction has not been caused over the short-term.
“Yesterday’s CML data showed that mortgage affordability is at a historic low for those lucky enough to make it onto the property ladder, but competition for affordable properties means that many lose out.
“Housing policy should no longer be thought of as one group versus another, since this leads to a fragmented market as well a fragmented approach to reform which ultimately makes change more difficult.”