- The UK is facing a 15% deficit in the delivery of new build homes compared to the five-year average that preceded the 2008 downturn
- New build homes are priced on average 30% more than second-hand stock – the greatest disparity in fourteen years
- 2015/2016 saw the lowest number of one and two bedroom homes built for over a decade
Our new report shows that the delivery of new build homes in the UK in 2015/2016 was 15% below the five-year average that preceded the market downturn of 2008. These figures emerge despite an ongoing government directive to deliver 220,000 new homes a year and a pledge by the Chancellor in his Autumn Statement to unlock £2.3bn to get Britain building.
In addition, the price gap between new and second hand homes has reached its highest level in fourteen years, resulting in a current 30% premium.
The UK’s acute housing shortage is ostensibly perpetuating the new build premium across the country. In Harlow, Gravesham and Preston, where new build homes command a 112.1%, 96.7%, and 95.5% premium respectively compared to the average second-hand home. By contrast, in areas such as Richmond-upon-Thames, Oxford, and Kensington and Chelsea, new build homes sell for 13.7%, 12.5% and 11.6% less than the average local second-hand home, indicating that the markets are delivering relative affordability in new homes.
The price premium is exacerbated by a disparity between the size of homes that are being built and local demand. In 2015/2016, 70% of all new homes were built with three bedrooms or more, up from approximately 50% in 2008/2009, leveraging average prices up in the process. At the same time, the lowest number of one and two bedroom apartments were built for fourteen years. The construction of one bedroom homes also halved from 12% in 2008/2009 to 6% in 2015/2016, constraining supply still further for first-time buyers, and limiting options for downsizers.
But which local authorities are achieving the optimum balance of supply, size and pricing? Unsurprisingly, London is a city of two halves, with the east outperforming the west. Tower Hamlets has increased local stock supply through new build construction by almost 10% in the last five years, while Greenwich has experienced a 6.1% uplift. With the delivery of Wood Wharf and the Greenwich Peninsula, that healthy supply is set to continue.
The East Midlands and the East are two stand-out success stories. Corby in Northamptonshire has witnessed a 7.4% increase in stock levels, while Cambridge, which is experiencing some of the greatest demand outside of the capital, has seen stock levels grow by 5.4%, following the adjustment of planning laws and a Local Authority strategy to get the city building.
Rory O’Neill, Head of Residential Division at Carter Jonas, comments: “With £2.3bn pledged by the Chancellor to deliver 100,000 new homes in his first Autumn Statement, The Government has expressed greater awareness than ever of the urgency to get Britain building.
“However, while the intent is evident, Philip Hammond now bears a responsibility to ensure that Local Authorities and public sector bodies are fully aligned on how that funding should be allocated and how it will work in practice – and quickly.
“Unless the Chancellor devotes a taskforce to unlocking the planning system, 2020/21 will be an ambitious target to feasibly tackle – and correct - the reduction in post-2008 construction outputs. It could be an astute move to review the successes of Tower Hamlets, Greenwich, Corby and Cambridge, and it goes without saying that some Local Authorities could take some key learnings from their example.”
Click here to view the complete report.