The state of the UK housing market is up for constant debate. And perhaps its little wonder - the country is still bruised and anxious following the housing crisis of 2008-9. Latest projections speculate yet more problems ahead, this time stemming from a small and dwindling supply of new housing. According to the construction industry, it’s an issue that will be exacerbated once the government’s Help to Buy Scheme ends.
Right now, housing demand outstrips a supply - a fact that is creating a major problem for would-be homeowners and the industry-at-large. Estate agency Savills has warned that the South of England alone will see a shortfall of 160,000 homes by 2018. And - according to the Home Builders Federation - we need to see 320,000 new homes every year or risk house price inflation exceeding 1.1%.
What impact is predicted for the construction industry?
The construction industry is now warning that the end of the Help to Buy Scheme - due in 2016 - will destroy any boom in new housing. The scheme’s flagship offer is a maximum 20% loan for new build properties, which has helped to bolster the market with a total of 18,000 reservations at the close of 2013. An increased demand for new housing via Help to Buy has driven the supply of homes - a fact that is expected to see 5.2% growth in the construction industry in 2015. A glance at Redrow’s latest figures shows exactly how the scheme has impacted a once struggling sector, although that’s not to say it’s an outright solution.
For construction companies, an end to the current boom of new builds is worrying. The Construction Products Association has expressed nervousness over the future, with predictions of a slowdown in the rate of new builds to 2% in 2016. The industry has called for more clarity from the government to explain how they will address the need for new housing over the coming years, in the wake of the Help to Buy Scheme.
Accounting for 6% of the entire UK economy, the construction industry is a voice to be listened to. However, worries come from all corners of the housing market - including would-be homeowners who have limited choice when it comes to buying. According to the Office for National Statistics, 240,000 households are created in the UK every year. Yet the Construction Products Association predicts that by 2017, we will see just 153,000 private housing starts and 30,000 public starts. That’s only enough to meet three quarters of demand.
Criticism for Help to Buy
While the construction industry is concerned about the end of Help to Buy, others are less worried. The Scheme has come under widespread criticism, mainly due to the failure to address the root cause of the problem - lack of supply. Help to Buy is designed to invigorate demand from buyers and many would prefer a ‘help to build’ alternative. It’s also been linked to the fear of another ‘boom and bust’. Vince Cable has been amongst the critics, warning “we don’t want a new bubble”.
Whatever happens come the end of the Help to Buy scheme, it is clear that the shortfall of new housing - equivalent to a ‘lost decade’ of building - needs to be addressed with some urgency. It’s a concern for the construction industry. It’s a concern for the economy. And it’s a concern for the would-be homebuyer - those families who want to buy but cannot, due to a lack of supply.
So what will happen? Only time will tell.
Contributor: Managing Director at Spark Squad – professional electricians in Exeter, offering both domestic and professional commercial electrical services. Alasdair has vast knowledge and expertise in state of the art electrical systems. With a degree in Electronic & Electrical Engineering from the Robert Gordon University in Aberdeen, Sidmouth-based Alasdair has worked as an Electrical & Electronic Engineer in the Offshore Oil & Gas Industry for the past ten years.
For more information about Spark Squad visit www.sparksquad.co.uk.