Godfrey Blight is a director at Crown Mortgage Management
The penny has dropped, we need more houses!
From the Prime Minister down, commentators in all areas now see the need to catch up on the shortfall of housing stock. Build affordable homes, correct the supply and demand mismatch, and prices will start to ease. The mortgage market has been stimulated with Help to Buy but if there is nothing the buy we need help to build!
So what is stopping us? In recent conversations with major house builders I was surprised to hear quite how difficult it is to upscale capacity in the sector. Indeed construction growth is predicted for this year and next at just under 5% year on year. So now it is not the desire to build or the demand to buy that is holding us back, it is the capability and capacity to build the properties that has become the restriction.
Following the crash in 2007 / 2008 over 300,000 people lost their jobs in the construction industry in the UK. Many returned home or moved elsewhere in Europe as the grass was not looking quite so green here, others lost their jobs and have moved on to other industries. Many of the suppliers and manufacturers of the raw materials required went out of business. This has meant that currently we do not have the capability to make the bricks let alone the skills to assemble them quickly enough to catch up the shortfalls in housing stock that have developed over many years.
There has always been an element of importing required to support the UK construction industry. As we have lost a lot of our capability, increasingly we are reliant on overseas production of our raw materials which brings in the complexity and cost of managing supply lines and exchange rates to the equation.
We can build our way out of the position, but it will take time and innovation in terms of types and methods of construction to get us there quickly. So now we can fund the homes with strong availability of mortgage finance, there are plenty of buyers but they will have to patient as we now struggle to build the properties. It is never a perfect market is it! One problem solved seems to create another.
Whatever the constraints are on the UK construction industry we are no doubt in for a strong few years as construction numbers grow. You just need to look at the cranes on the London skyline to see the difference. But for quality brick layers it will be boom time as the demand for their skills reaches even higher than those cranes. Could the conversation change to talking about brickies rather than bankers bonuses for once!