A rapid expansion of the house building industry has the UK on track to deliver the Government’s target of one million new homes by 2020, but more are needed, according to a new analysis.
Indeed, an additional 100,000 homes are needed each year if the new supply is to have any effect on housing affordability and to boost volumes and improve affordability more land needs to be released in the areas of greatest need, including green belt swaps, says the report from international real estate adviser Savills.
It explains that new homes volumes are up almost 50% on three years ago, meaning that new housing supply is almost meeting demand across most of the UK. However, London and South East regions are bearing the brunt of the shortfall, accounting for 104,000 of the 2015/2016 total, which puts great pressure on affordability. Only a fifth of households can afford to buy the average new home in these regions.
‘Policymakers must take this shortfall in the south east of England seriously if we are to finish the job of solving the housing crisis. Many more new homes are needed at price points that are affordable to the many, and across a range of tenures, if affordability pressures are to be eased,’ said Chris Buckle, director of Savills residential research.
New homes need to be priced as a mass market product to ensure high sales rates, the report says. Increased land release in areas of high housing demand would reduce competition for development sites, leading to lower land values and enabling new homes to be sold at lower price points.
If there were more land on the market, land owners may need to realign expectations on the value of land, Savills argues, though that value will still need to be high enough to persuade them to sell. For the policymaker, it means recognising that lower new homes values may result in less land value to be captured through CIL and section 106.
A commitment to solving the housing crisis is evident in the housing white paper, but to address the crisis where it is most acute will require a regional market led strategy for land release, including a programme of green belt swaps, the firm says.
The report also points out that Government aid, particularly in the form of Help to Buy, has helped boost the number of homes being built and will support around 20% of the 190,000 new homes expected to be built in 2016/2017, compared with 34,000 in 2015/2016 and 28,000 in 2014/2015.
Far the biggest increase has been in the number of homes being built without public funding, both market sale and built to rent units, up from only 62,000 in 2015 to an expected 111,000 this year, an increase of 79%.
The Savills report details evidence of high delivery sites in high demand areas across the South East. These include sites in Andover, Aylesbury and Bedfordshire where homes are priced at a discount of up to 15% compared to the local market on an average price per square foot basis. Each of these sites completed more than 600 new homes for sale in the past three years, a build-out rate significantly above average.
Even in high demand areas, such as Cambridge and Horsham, there are large numbers of homes being sold at a discount to market averages on a per square foot basis, the firm’s researchers found.
‘To build on this momentum, policy needs to go further, and our report contains some uncomfortable truths. Help to Buy may have helped boost housing delivery and given aspiring home owners a welcome leg up onto the market, but something more fundamental needs to be done to ensure we deliver more homes quickly, and at prices that more people can afford, whether to buy or to rent,’ said Buckle.
‘Policymakers need to recognise that high volume delivery of lower priced housing will limit the capacity of developers to fund infrastructure and affordable housing in the way they currently do, via section 106 and CIL payments, so other sources of funding for infrastructure and affordable housing will be essential,’ he added.
Developers will need to change their approach, Savills says, adding that the Government clearly wants to hold developers to account for new home delivery, through better, more transparent data and sharper tools to ensure housing with planning permission is built.
‘Although it is unclear what form these tools will take, this pressure, combined with the new housing delivery test for local authorities, means that it will not be enough for the development industry simply to maintain current modes of delivery,’ Buckle concluded.
Source: Property Wire