Housebuilding up 15% over spring after pandemic year slump similar to 2008

The number of locations being developed for housing has increased by 15 percent between April and June this year compared to the same period last year.

Figures from the Office for National Statistics show that housing construction is picking up strongly in the second quarter of this year, with 51,730 homes under construction.

In addition, the start of housing construction rose 21 percent from the first to the second quarter.

But that came after a significant slump in construction during the key pandemic year 2020 to 2021, when housing construction plunged by a similar amount to the 2008 financial crisis that ravaged developers and the property market.

Figures show that the number of completed homes has increased by 6 percent compared to April, May and June last year to 44,940. That was also an increase of 3 percent compared to the previous quarter.

However, the run rate remains well below the UK government’s target of building 300,000 homes each year. For this, an average of 75,000 would have to be built in each quarter.

Looking further back, for the year 2020-21 as a whole, the net number of additional homes declined 11 percent from the year before, in a pattern similar to what happened during the 2008 financial crash, according to the ONS.

This figure shows the total number of new homes completed in a year, minus the demolished homes.

The lack of housing stock in the UK is one of the factors driving rising house prices, along with low mortgage rates. Property inflation remains high despite the tumultuous economic conditions and rising interest rates.

House prices rose 15.5 percent in July, according to the ONS, although experts say this high figure was a statistical quirk brought on by the end of the stamp duty holiday a year earlier. Analysts expect house prices to begin to fall towards the end of the year due to the rapid rise in new mortgage rates.

Building up: ONS figures show new building starts recover faster than completions after Covid-19 restrictions are lifted

Rhys Schofield, director of mortgage broker Peak Money, said: ‘If you look at the numbers that look big on paper, the UK needs to build 340,000 new homes a year by 2031. The government’s target is 300,000 per year.

‘These latest figures are all amply disappointing, as a result of which house prices can only be forced in one direction. Due to the lack of urgency around housing, it is becoming increasingly unattainable for many people to have a place to call home.’

Housing trends ‘similar to financial crash’

Construction trends are similar to those seen in 2008 amid the global financial crash, which saw both starts and completions fall, the ONS has noted. Developments started to recover from 2009 and during the following three years both start-up and completion leveled off.

In 2020, there was a sharp drop in take-offs and deliveries due to the Covid-19 restrictions introduced in the spring. After a strong increase in the September 2020 quarter, take-offs and completions continued to increase until the March 2021 quarter.

Start-ups and deliveries then both fell until December 2021. Since then, both start-ups and deliveries have increased.

In 2020-21, private real estate developers have built a total of 78 percent of newly completed homes, housing associations accounted for 20 percent and local governments only 2 percent.

According to official figures, the number of municipal properties in the country has steadily increased since 2013-14.

Municipalities increased their real estate inventory by 216,490 in 2020-21, down 11 percent from the total added in 2019-20.

The figures also show a decline in the number of approved housing applications in the year to June 2022. The latest provisional figures show that 280,000 homes were approved in the 12 months leading up to the end of June this year, a 16 percent decrease from the 334,000 homes granted in the year up to and including 30 June 2021.

Matthew Spry Senior Director at planning and development consultancy Lichfields, said: ‘The general outlook is that it is showing a reasonable level of new housing supply but with a trend that is now downwards. And the troubling indicator of things to come is that the annual flow of new building permits has declined significantly and is now below levels at the height of the pandemic.

“While housing supply is virtually better than it was in the immediate aftermath of the financial crash, it is on a downward trend as most people think it should rise towards 300,000.”

Spry also warned that while the Leveling and Regeneration bill has “good ideas” for improving the planning system, it is unlikely to lead to new homes until the end of the decade and local councils will be reluctant to act. before the legislation a in a few years a new regime.

The price of building materials in the UK would also dampen housing construction. According to the ONS, building materials prices in the UK were 24.1 percent higher in July 2022 than a year earlier.

Building costs: The price of building materials in the UK fell slightly in July, but the numbers show a 24% increase compared to the same time last year.

And while prices have fallen since May and June this year from May and June levels, they are still above October last year, when the deficit was most acute.

Edgar Rayo, chief economist at Finanze, Finanze, said: “These newly released numbers highlight the construction cost inflation that is plaguing the industry.

Rising construction costs due to supply chain problems and increases in fuel prices continue to weigh on the profit margins of UK developers.

“While we monitor the imbalance in the housing market, we still see very high demand for housing, which continues to put pressure on prices.”

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