Is 180,000 new homes a year achievable?

A new report from Knight Frank on housebuilding has found that delivering more than 180,000 new homes a year is unachievable under current market conditions, according to the opinion of over two thirds of UK housebuilders.

Related topics:  Property
Warren Lewis
27th April 2015
Construction 1

The report revealed that 67% of respondents said the maximum sustainable annual delivery of new homes was 180,000 or less. Just 9% said it was possible to build more than 200,000 residential units a year.
More than half of all developers and housebuilders said a rise in the delivery of affordable homes over the next year was unlikely. However, around 60% expect a continued rise in the number of total housing starts and completions over the next 12 months.
The report also found that nearly four in five respondents (78%) expect new-build prices to rise over the next 12 months, with 43% expecting rises of up to 5%. 91% of respondents expect a rise in construction costs amidst the continued pressure on housebuilders. The majority (59%) predicted an increase of a further 5 to 10% this year.

Greenfield land prices will rise, according to two-thirds (68%) of respondents.

More than half of respondents (56%) say the Community Infrastructure Levy (CIL) is weighing on development volumes.

The survey also quizzed housebuilders on what measures policymakers should take to increase long-term housing delivery in the UK. Moving to bump up resources in local planning departments (82%) was considered the most important step, with improvements to skills and training in the industry (58%) and opening up access to public land (57%) also amongst the top suggestions.     

Gráinne Gilmore, head of Knight Frank UK Residential Research, commented: “In the run-up to the election, all political parties agree that the delivery of more new homes is a priority. Yet more than two-thirds of housebuilders believe that under current market conditions, the maximum number of units that can be sustainably delivered each and every year is 180,000 or less.

Policymakers, especially those in power after the election, may want to heed the calls from housebuilders to beef up planning departments in local authorities, plough more investment into skills and training in the construction sector and provide better access to public sector land, moves which the housebuilding industry is signalling could move the country closer to building enough homes for all.”
Justin Gaze, Joint Head of Residential Development at Knight Frank comments: “The capacity to deliver the sheer number of new homes required is the fundamental issue faced by the UK’s housebuilders. The inability to create the necessary number of new homes is being driven primarily by a skills shortage in the development sector which shrunk dramatically following the financial crisis, limited development funding and the lengthy mortgage approval process which is delaying purchasers.”      

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