Thankfully, it’s becoming clear that the industry has largely shaken off the effects of the 2007 crash, and whilst the recent snap election and uncertainty surrounding Brexit have both threatened to derail progress, there are many reasons for positivity in the sector. National House prices are on the up, and the Government is showing signs that it is serious about supporting growth in the sector.
The latest data and analysis from ONS/Land Registry has revealed that average house prices in the UK have increased by 5.1% in the year to July 2017. According to the UK HPI, the average UK house price was £226,000 in July 2017, £11,000 higher than in July 2016 and £2,000 higher than last month.
According to Savills Research, the number of new homes completed reached 211,000 in the year to June 2017, up 49% in three years. Developers have increased the number of market homes they deliver by 56% over the same three-year period. Independent of Help to Buy, and excluding affordable housing delivery, the number of new homes absorbed by the market grew from around 70,000 per year between 2009 and 2015 – to 110,000 in 2017. This is a significant increase from past delivery rates.
Going forward, house building looks set to continue as a primary driver of growth, with private housing starts rising by 5.0% in 2017 and 2.0% in 2018. The Government's Help to Buy equity loan has supported growth in building activity and the additional £10 billion that government announced for the scheme in October looks set to continue to sustain house building. In addition, the 2017 Housing White Paper proposes a more streamlined approach to planning and suggests giving local authorities increased powers to deliver community infrastructure. If this is well implemented, this could help to boost the industry and encourage development.
The emerging picture we’re seeing across the housing market is strong buyer demand coupled with a shortfall of new homes. Whilst tax reform and Government schemes will help to boost new builds, more will need to be done in the coming years. To help reduce build costs, increase efficiency, and tackle a shortage of skilled workers, housing developers may need to venture beyond traditional forms of construction to ‘smart construction’ methods.
Most commonly, smart refers to off-site construction where prefabrication, modularisation, and standardisation is used to reduce costs, raise efficiency and boost productivity.
Tom Ground, Chief Exec of Legal and General Homes said “Offsite manufacture of residential housing is the key to addressing the UK’s housing crisis. It means we can build homes quicker, cheaper and better, whilst achieving greater certainty over costs. This is the change that is needed to institutionalise investment in residential housing.”
Whilst conventional housebuilders are unlikely to move to ‘smart’ forms of construction anytime soon, it’s likely that the key growth area for off-site methods will be the burgeoning private build to rent sector together with housing associations. In time, as barriers to entry are eroded and proof of quality and certification is sustained, it’s likely that conventional housebuilders will follow suit. Looking forward, it’s clear that developers across the country will need to look to technologies such as BIM, new materials, and offsite construction methods to drive innovation and build growth. The future is exciting… are you ready?
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