Even though the UK property market continues to grab the headlines there is growing concern about the lack of housing supply. Indeed the number of properties currently available per estate agent branch fell from 55 in July to 38 in August. While we also saw a dip in those looking for properties, falling from 462 per estate agent branch down to 408, there is still immense upwards pressure on UK property prices. So, why is the supply of properties in the UK now at an 11 year low?
Strong property market
As the UK property market continues to go from strength to strength it is perhaps understandable that fewer people are looking to cash in their property chips at this moment in time. Once the sector does turn it is likely we will see a deluge of properties hitting the market but until home owners think the market has peaked it is difficult to see a significant increase in supply.
As you might expect, a reduction in the supply of properties to the marketplace has led to a fight amongst property buyers to acquire those properties available. In many cases this has pushed first-time buyers out of the market as those with equity/property behind them battle it out. Even though the issue of first-time buyers has been pushed to the sidelines it is exacerbating the buy to let issue. First-time buyers unable to afford their first home will be pushed to rent property in the short to medium term thereby increasing demand for property and pushing prices higher again. Is this something of a vicious circle/self fulfilling prophecy?
What can the government do?
When you bear in mind the historically low interest rates in the UK at the moment it is not difficult to see why buyers of UK property continue to grow in numbers. Even if the government had any control over interest rates, which are set independently by the Bank of England, an increase in rates would reduce demand for property but also kill the ongoing economic recovery. So, the authorities need to look at the bigger picture and this is likely to encourage further interest in UK property.
As we have mentioned time and time again, all politicians at the last election promised a deluge of new builds for first-time buyers. It was suggested that up to 200,000 new homes would be built per annum but so far there has been very little in the way of movement. It seems that politicians are happy to promise the earth when they want your vote but when push comes to shove they are not as keen to follow through with their promises?
Is limited supply of property really a problem?
The reality is that property markets are cyclical and while there is limited supply and ever increasing demand at the moment this will turn at some point. Many estate agents have been talking of problems brewing for some time on the supply front. However, why would any government really look to reduce the value of a homeowner’s property by flooding the market with new builds?
There are other factors impacting the rising UK property market which include significant demand from overseas investors. We need new builds in the UK and we need them in large numbers!