The gap between reality and government housebuilding targets
Hiten Ganatra (pictured) managing director of Visionary Finance
There’s no escaping the fact that there is a colossal gap between the government’s 300,000 homes a year target and reality.
The latest data from the Ministry of Housing, Communities and Local Government figures show that housing starts have now fallen since Q3 2018 for three quarters in a row and whilst London has been leading the fall in housebuilding, more recently, construction has fallen sharply in nearly every region.
While the economy has been exceptionally resilient through the long period of uncertainty as we battle through Brexit negotiations, the housing market has become stifled. Given continued economic uncertainty, housing starts are on track to see a sizable fall in 2019.
Where does this leave us as we start to look at what 2020 might bring?
Hopefully uncertainty surrounding Brexit has now peaked. It’s encouraging that the number of new build homes which were completed in the latest quarter was up by 11% on a year earlier.
But the near future presents a number of challenges for developers. The difficulty lies in that if the market is slowing down, where is the incentive for them to boost dwellings? No business wants to run the risk of not being able to sell the stock they have, and the housebuilding sector isn’t any different.
Any over-supply of housing stock will have an impact on the price that can be achieved. It’s a sizeable gamble.
We are definitely seeing a slowdown in the mortgage arena where potential buyers are holding off until we get back onto what they see as a smoother path.
All the while, house prices continue to climb and people who were priced out of the market before are not going to find it any easier to get on to the ladder in the coming years.
Help to Buy has been dutifully propping up demand for new homes. But with the Help to Buy overhaul – equating to a diluted version- in 2021 following by being wound up in 2023, its magical effects on the numbers will start to fade. Developers are doing deals to keep numbers up. But the wider problem remains.
Further consideration needs to be given to whether or not the original targets set by government were realistic or just plain ambitious.
Either way, the National Housing Federation recommended that 340,000 be built every year to meet the demand. Many factors affect the new build housing sector such as the supply chain, contractors, workforce, planning permission etc.
Whatever happens, there’s a need for drastic action.