200,000 new homes a year is an “unachievable” figure

Only six per cent of housebuilders believe that the key target of 200,000 homes to be built every year is deliverable, according to Knight Frank’s Housebuilding Report “Building Momentum”

The survey also flags the sector’s reliance on the Help to Buy scheme as it continues to support housebuilding figures. The extension of the scheme will lift development volumes between now and 2020, more than 75 per cent of respondents say, while more than 40 per cent believe that it will increase the size of schemes undertaken.

The majority of housebuilders believe that construction of new homes is expected to rise over the next year by more than 10 per cent, with more than a quarter expecting an uplift of more than 25 per cent in start volumes.

Grainne Gilmore, Head of UK Research at Knight Frank, said:

“The question of whether it is feasible for housebuilders to plug the housing hole left by the relative lack of government investment remains a primary concern.

“There is no doubt that developers have stepped up activity since the zenith of the financial crisis – official data shows completions in England rose 4.5% over the last year. But this still leaves development some way off the levels needed to meet demand across the UK.

“Our survey suggests however, that development volumes will continue to rise, it is just a question of whether it is going to be enough to meet that 200,000 target. Looking further forward, more than seven in ten respondents expect the number of housing starts by their business to rise over the next 12 months, and nearly half of respondents expect an uplift in housing completions of up to 25 per cent.”

The broader recovery in the UK is now reflected in the fact that there is an expectation of a country-wide uplift in activity over the next 12 months. The Knight Frank survey shows housebuilders and developers active in Wales, Scotland and the North East expecting some of the biggest rises, albeit from a low base. The number of planning permissions for residential units rose most strongly in the Midlands last year.

However, the majority of housebuilders believe that 200,000 new homes a year is unachievable; 30 per cent saying that 180,000 is the maximum and only 6 per cent saying that exceeding 200,000 on a regular annual basis was achievable.

Gilmore said:

“Consistency of housing policy is fundamental to boosting supply as well as expanding access to public sector land. It is likely that the confidence engendered by the Government intervening in the housing market – via the Help to Buy scheme – has had a bigger effect on prices than the scheme itself.

“Next year’s general election throws up some uncertainty about Help to Buy – Labour have not commented on their intentions around the equity loan, although they too have criticised the mortgage guarantee. Also, finding a suitable unwinding mechanism for the Equity Loan will be paramount in the coming years if a ‘cliff edge’ market distortion is to be avoided in six years’ time.”

In the UK, 28.2 per cent of all new build sales were acquired via Help to Buy and 2.4 per cent of all sales used the scheme. The largest proportion of homes sold under the scheme was in Derby were these figures rose to 80 per cent and four per cent respectively.

See the full report here or read more on www.knightfrankblog.com