UK house building far behind demand

UK house building far behind demand

Over the next five years demand for rental accommodation in the UK is forecast to grow by 1.1 million despite a range of government policies to boost home building.

According to a new analysis by real estate Savills, an additional 220,000 homes for rent a year is still needed, and that although the Government has announced a target of building 400,000 new affordable homes over the course of this parliament.

The report also revealed that, while some of the demand for rental property will be curbed due to new policies, it will stay high as the economic recovery and ongoing low interest rates haven’t done a lot to reverse the growing need for rented accommodation.

It’s rather the opposite. The inflation of house prices ahead of wage growth pushed home ownership further out of reach for many. And that at a time when stock in the social rented sector is shrinking, overall by 2.8% in the last five years, leading to a growing private rented sector.

The English Housing Survey stated that private renting has been increasing by an average of 17,500 homes per month over the 10 years to 2014.

A variety of Government initiatives like Starter Homes, Shared Ownership homes and larger equity loans through Help to Buy London are trying to reverse this trend and help people to get onto the property ladder.

“But demand for rented homes could still rise more sharply than we have forecast. We would question whether policies can accelerate house building enough to see the Government’s target of 400,000 affordable homes for sale reached in the timescale set,” said Susan Emmett, director of Savills residential research.

“And given the overlap between the different schemes, each focused at similar parts of the market, it is possible that one scheme could simply replace the other rather than providing additional homes,” she explained.

“This analysis demonstrates that we still need to provide a substantial number of homes for rent. Government policy should focus on supporting the development of new homes to rent as well as to buy,” she added.

Instead though, as the need for rental accommodation grows, recent policy announcements are trying to constrain the supply of rental homes. The recently announced introduction of a stamp duty surcharge of 3% for buy-to-let investors and the restriction on tax relief on mortgage interest payments may limit the ability of private investors to expand their portfolios, the report explains.

These developments present a rather large opportunity for bigger scale institutional investors to fill the gap. They are expected to remain exempt from the tax changes and become increasingly attractive sources of bulk finance for new projects.

Furthermore it revealed that investors are looking in London, but also that cities beyond the capital become more interesting with a growing demand in rental accommodation in the private sector. Savills especially highlighted Manchester, Reading, Edinburgh and Bristol as top-rated locations for investors.

Source: Property Wire

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