The UK prime minister is facing significant opposition from his own party to end housebuilding targets for councils. This short guide to investing UK explores what this could mean for property investors.
What are the housebuilding targets?
The UK government set a target to build 300,000 new homes annually by the mid-2020s. This commitment was made to tackle the UK’s housing crisis. A shortage of homes is driving up prices and making it difficult for many people to afford a home. The government is also investing in infrastructure and creating new schemes to help people climb the property ladder. This includes Help to Buy equity loans, shared ownership schemes, and the Right to Buy scheme, although the Help to Buy scheme is ending on 31st March 2023. The government is also working with local authorities and housing associations to increase the supply of social housing.
How many homes does the UK need?
The exact number of houses that the UK needs each year is not known. The specific requirement will depend on population growth.
According to research undertaken by Heriott-Watt university there is currently a backlog of 3.91 million households in Great Britain. The largest need is in England which is 3.37 million. They estimate over the next 15 years, 340,000 per year for England (380,000 for GB) are required to reduce this backlog.
However, expectations for housing demand vary. According to the National Housing Federation, the UK needs to build at least 250,000 homes a year to meet the demand for housing.
How many homes are currently built each year in the UK?
It is difficult to obtain housing data for the UK. However, it is much more straightforward to obtain data for England. In England, there were 232,820 new homes created in 2021-22.
|Properties converted from non-domestic to residential.||22,770|
|Conversion from houses to flats||4,870|
|Other homes (caravans, houseboats, etc.)||780|
|Offset by demolitions||5,680|
Is the number of new homes increasing?
On average, the number of new homes delivered in England between 2001 and 2022 was 185,462. However, broadly the number of new homes has been increasing.
What does this mean for property investors?
There is no silver bullet when it comes to solving the UK’s housing crisis. Many of the problems which exist around the supply of new homes will not be easily resolved. However, nationally set housebuilding targets exist for a reason.
The Home Builders Federation previously warned that scrapping the 300,000 targets could lead to 100,000 fewer homes each year. A chronic shortage of homes could result in soaring house prices which drive deposit requirements and mortgages ever higher. This means first-time buyers will find it harder than ever to get on the ladder. Added to this, high interest rates are forcing up the mortgage costs for millions. Property investors may become more important for property developers than ever, with reducing numbers of first time buyers able to afford to buy, ‘stuck’ in rental property.
Housing targets help to catalyse supply as well as providing consistency and stability – all things the market desperately needs as we seek to rebalance supply and demand.
Guide to investing UK – are you thinking about investing in the UK?
It is important to clearly understand why they are investing and their objectives. You might be interested to checkout our investor checklist here.
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