There is no doubt that the Conservative party election win has given the construction sector a much-needed boost. This move is reflected in the number of new homes built between March and May 2015 compared to the same period 2014. There has been an increase of 15% during these two periods with a total of 43,987 new homes across the UK. So, is this a sign of things to come or a release of pent up demand post the general election?
First of all it is worth looking at the British construction sector and the fact that it is currently at a nine-year high with regards to confidence figures. The fact is that without the renewed confidence in the construction sector it would be difficult to see any great increase in new home builders in the medium term. So, this figure in itself would seem to support the growing appetite for new property across the UK.
Increased mortgage funding
Mortgage approvals recently hit a 14 month high in the UK showing a 4% year-on-year increase which is again an excellent indicator of the underlying strength of the UK housing market. This growth has materialised despite the fact that the authorities were “forced” to bring in tighter regulations regarding mortgage funding. It would appear that the banking community is finally getting to grips with the new regulations.
While the recent performance of the UK economy has been impacted by the general election there is no doubt that the UK has one of the strongest economies in the Western world. Wage figures would suggest a year-on-year increase across the board although there is some scepticism as to whether those at the lower end of the income spectrum are feeling the full benefits of the ongoing recovery. However, this has most certainly fuelled growth in the UK property market and with further economic growth expected in the short, medium and longer term this is again an important factor in the building blocks of confidence.
It was also interesting to see that on average housebuilding company share prices have increased by around 20% since the general election on 7 May. There had been concerns that a possible left wing Labour government would have reorganised the mansion tax and possibly introduced an array of other property related charges. There was an immediate boost to this particular sector just hours after the election result was announced with many investors breathing a huge sigh of relief.
Good start, but much more to do
Conservative estimates suggest that the UK requires at least 150,000 new homes per annum to satisfy existing and future demand. The introduction of 43,987 new homes in the three-month period to May 2015 is obviously a step in the right direction but the momentum needs to carry on and improvements continue. Some of the increase over this particular period may well have benefited from an overhang prior to the election so we will now see whether the UK government is good to its word about supporting and nurturing the housebuilding sector going forward.