The construction industry has seen healthy growth with a surge in housebuilding, but is it enough to plug the growing gap between supply and demand?
While there remains an imbalance in many parts of the country between buyers seeking property and the number of properties available, new statistics show that the construction sector is making positive headway.
The Office for National Statistics (ONS) has revealed the latest data for the second quarter of this year, which demonstrate that the number of sites being developed for new homes has risen by 15% compared with the same period between April and June last year.
It also shows that there were 51,730 new-build properties under construction at the end of Q2, which although is still short of the government’s target, is a positive move in the right direction for the country’s housebuilding goals.
Barriers for housebuilding
While the figures show a sector on its way to recovery, it has certainly faced – and is still dealing with – a number of headwinds in recent years which has slowed housebuilding down.
The Covid pandemic brought some building sites to a halt temporarily, and caused numerous delays even once sites had reopened and building works had recommenced.
Construction costs have been famously on the rise, too, exacerbated by issues including Brexit and Russia’s invasion of Ukraine, with supply chain issues and soaring fuel costs also playing a part. In some cases, the smaller builders and developers have been the worst hit.
With the government’s housebuilding target of 300,000 a year still yet to be met, the latest figures are an indication that 2022 has been a year of recovery in some parts of the sector, but there is still some way to go.
Boosting the country’s dwellings
The ONS found that the net increase in dwellings in the UK fell by 11% in 2020-2021, compared with 2019-2020, due to the aftermath of the Covid pandemic. But the latest quarterly data shows that the number of completed homes increased by 6% compared with 2021’s figures.
This also represents a 3% rise compared with Q1 2022, bringing the total number of completed homes for the period to 44,940.
One of the knock-on effects of strained supply and low housebuilding levels has been the ongoing climb of house prices across the country. In the year to July, the residential housing market saw prices surge by 15.5% to £292,000. This was the highest yearly inflation rate seen in UK house prices in almost 20 years.
The house price rise means that the typical property owner has gained £39,000 over the past 12 months. The jumps in England and Wales were even bigger when separated from the UK average, at 16.4% and 17.6% respectively.
While the property sector may begin to feel the impact of factors such as rising interest rates and the cost of living squeeze on households, while housebuilding continues to fall short of demand, prices are expected to be supported.
High demand remains
Commenting on the figures, Matthew Spry, senior director at planning and development consultancy Lichfields, believes that while housebuilding has seen some recovery, the trend is still largely going in the wrong direction.
“The overall perspective is that it is showing a reasonable level of new housing supply but with a trend that is now downward,” he said. “And the worrying indictor in terms of what is coming is that the annual flow of new planning permissions has decreased markedly and is now below the level at the height of the pandemic.
“Although the level of housing supply is just about better than it was in the immediate aftermath of the financial crash it is heading in a downward direction when most people believe it should be increasing towards the 300,000 figure.”
Meanwhile, Edgar Rayo, chief economist at property finance company Finanze, added: “As we track the imbalance in the housing market, we still observe the very high demand for housing, which continues to put pressure on prices.”