Mortgage talk - Property supply shortage drives up prices
Mon 30 Jun 2014
One of the main factors behind the recent surge in property prices is that demand from buyers is outstripping the supply of homes for sale. London estate agent Marsh & Parsons, for example, has 24 buyers on its books for each new property it registers. Open days, bidding wars, gazumping and double-digit house price growth are the result. The answer, experts say, is to increase the supply of homes, by building hundreds of thousands of new ones every year. In 2004, economist Kate Barkers review into the UK housing market concluded that we needed to build an extra 250,000 homes every year for the next 25 years to meet demand. A decade later, the UK continues to woefully undershoot that target, building an average 115,000 homes a year. And that underperformance looks set to continue. Only 6% of house builders believe the UK can build more that 200,000 new homes each year, according to a survey by property specialist Knight Frank. Although new housing starts are rising, we are still well short of that number. Worse, after years of failing to build enough homes, we now have to construct even more, to make up the shortfall. In March, the Home Builders Federation said we now need to build 320,000 homes a year, to keep pace with growing demand and a rising population. Few in the property industry believe that is possible. First-time buyers hoping that a wave of new housebuilding will slow the UK rampant house price growth look set to be disappointed.