The Royal Institute of Chartered Surveyors (RICS) has issued a report criticising the UK government’s new build policy amid suggestions that houses in the UK will become “even more unaffordable” over the next five years. This is certainly a blow to the UK government which has been championing its own increase in new build figures over the last few months. Having averaged just 120,000 new homes per year since coming into power back in 2009 the latest figure is creeping towards 150,000 homes. So, is there a real problem?
UK housing requirements
There are differing opinions as to the number of new houses the UK requires on an annual basis to satisfy demand. These vary from anywhere between 200,000 up to 250,000 which shows how far the UK government is from the optimal target. There is also a need to maintain demand going forward so whether any government would sanction an increase in new house builds to fully satisfy demand is debatable. If this was the case it would probably lead to a softening in house prices which would have an impact upon individual wealth and the construction sector.
Indeed it is a well-known fact that previous governments of the UK have never really targeted the optimal new build requirements in order to keep the UK property market robust and in demand.
House price movements
It was interesting to see that the RICS report confirmed that all parts of the UK have seen increasing house prices over the last three months at a time when many experts are sceptical about the state of the market. The fact that the number of properties for sale has fallen month by month since February explains a lot as does the fact that a reduction in new build numbers in light of the 2008 recession is only now beginning to catch up with the UK.
The report also contains a five-year projection suggesting not only a constant increase in UK property prices but also rents. The rental market is also very important because as fewer people are able to afford to buy properties outright many have been forced to look at the rental market. This in turn is pushing rental values higher (and property prices) and is likely to be a trend for some time to come.
Hot property markets in the UK
Despite the fact that London continues to grab the headlines for an array of different reasons it seems that the East of England is the current property hotspot. Recent figures suggest that the likes of East Anglia have seen the fastest rate of growth in property prices with the north-east of England at the other end of the spectrum. A recent report by Savills also suggests a very strong UK property market with an expectation that prices will increase by 17% by the end of 2020.
Interestingly just 5% more surveyors questioned in a recent survey believe that the London property market will rise over the next three months. Whether or not the market is taking a breather or indeed profit-taking is beginning to set in remains to be seen.
To say that the UK property market is robust at the moment is perhaps an understatement with prices set to increase for the foreseeable future. The UK government is slowly increasing the number of new builds per annum but a significant improvement is required to get even anywhere near fulfilling demand. The UK economy is starting to struggle but UK property prices continue to move forward, creating a difficult quandary for the UK government.