The number of sites being developed for homes increased by 15 percent in April-June this year compared to the same period last year.
Figures from the Office for National Statistics show a significant rise in housing starts in the second quarter of this year, with 51,730 homes under construction.
In addition, the housing construction business increased by 21 percent from the first quarter to the second quarter.
But that followed a major slump in construction during the key pandemic year of 2020-2021, when housing construction fell by a similar amount as it did during the 2008 financial crisis that hit developers and the real estate market.
The net increase in housing stock in the UK fell by 11% in 2020-2021 compared to 2019-2020 as construction recovered in the wake of the Covid-19 pandemic.
The figures revealed that the number of completed homes increased by 6 percent compared to April, May and June of last year, to 44,940 homes. This was also an increase of 3 percent from the previous quarter.
However, the run rate is still well below the UK government’s target of 300,000 homes to be built each year. For that to happen, an average of 75,000 would have to be built each quarter.
Looking back, for 2020-2021 as a whole, net additional homes fell 11 percent from a year earlier, in a pattern the Office for National Statistics said was similar to what happened during the 2008 financial crash.
This number represents the total number of new homes completed in a year, minus those demolished.
The UK housing shortage is one of the factors driving up house prices, along with low mortgage rates. Real estate inflation remains high despite volatile economic conditions and increased interest rates.
House prices rose 15.5 percent in July, according to the Office for National Statistics, although experts say that high figure was a statistical oddity caused by the end of the previous year’s stamp duty holiday. Analysts expect home prices to start falling towards the end of the year, as the rapid rise in new mortgage rates hurts.
Construction: ONS figures show that starts on new buildings are recovering faster than completions after Covid-19 restrictions are lifted
Rhys Schofield, managing director of mortgage broker Peak Money, said: “If you cut out numbers that look big on paper, the UK needs to build 340,000 new homes a year until 2031. The government’s target is 300,000 a year.
These last numbers all fall short, which means home prices can only be charged in one direction. With the lack of urgency around home building, having a place to call home is out of the reach of many people.
Homebuilding trends ‘like a financial meltdown’
Building trends are similar to those seen in 2008 amid the global financial meltdown as both starts and finishes fell, the Office for National Statistics noted. From 2009 developments began to recover and over the next three years both starts and finishes leveled off.
In 2020 there was a sharp decline in starts and finishes as a result of Covid-19 restrictions introduced in the spring. After a sharp rise in the September 2020 quarter, starts and completions continued to increase through the March 2021 quarter.
Then both starts and completions decreased until December 2021. Since then, both starts and completions have been increasing.
Overall, in 2020-21 private property developers built 78 per cent of new completed properties, housing associations made up 20 per cent and local authorities just 2 per cent.
The number of council-owned properties in the country has been increasing steadily since 2013-2014, according to official figures.
Councils increased their stock of properties by 216,490 in 2020-2021, down 11% from the total added in 2019-20.
The figures also reveal a dip in the number of residential planning applications approved in the year ending June 2022. The latest provisional figures show that 280,000 homes were granted permission in the 12 months leading up to the end of June this year, down 16 per cent. Down from the 334,000 homes granted permission in the year to June 30, 2021.
Matthew Spry, senior director at planning and development consultancy Lichfields, said: “The general perspective is that it is showing a reasonable level of new housing supply but with a downward trend now. It is now below the level at the height of the epidemic.
“Although the level of housing supply is almost better than it was in the immediate aftermath of the financial crash, it is trending downward when most people think it should be rising towards the 300,000 number.”
Spry also warned that while the Settlement and Renewal Bill had “good ideas” for improving the planning regime, it was unlikely to result in new homes until the end of the decade and local councils would be reticent to do anything before the legislation brings in a new regime in two years’ time.
The price of building materials in the UK is also believed to have a mitigating effect on home construction. Building materials prices in the UK in July 2022 were 24.1 percent higher than the previous year according to the Office for National Statistics.
Cost of construction: The price of building materials in the UK fell slightly in July, but figures reveal a 24% increase compared to the same period last year.
And although prices are down from the level since May and June of this year, they are still higher than October last year when the shortages were more severe.
Edgar Raiu, chief economist at mortgage finance company Finanze, said: “These newly released figures highlight the construction cost inflation hitting the industry.
Rising construction costs caused by supply chain issues and rising fuel prices continue to squeeze profit margins for UK property developers.
“As we track the imbalance in the housing market, we continue to see very high demand for housing, which continues to put pressure on prices.”
Best mortgage rates and how to find them
Mortgage rates skyrocketed as the Bank of England’s base rate rose rapidly.
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