UK house prices: Housebuilding won’t meet demand, so will 2015 lead to a worsening supply shortage?
Despite the slowing housing market, a surplus of demand and dearth of properties could lead the housing market into crisis in 2015.
A survey by the National Association of Estate Agents (NAEA) has revealed many of its members believe that government plans to build new homes will not do enough to sate demand.
In fact, in recent years the vast majority of completions in the UK have come from the private sector, which cut its investment during the crisis (see chart above).
Government figures suggest there will be 232,000 more households a year in the UK up to 2033, while only 137,960 homes were completed in 2013.
According to the NAEA, this disparity has got its members worried. Almost half of members think demand for property will increase, while 21 per cent of those polled think housing stock will decrease and 33 per cent think it will stay the same.
In either of these two scenarios, the shortage will worsen. A further 33 per cent of those polled thought supply will improve, but not by enough to meet growing demand.
Howard Archer, a senior economist at IHS Global Insight, said he believed the market will grow by around five per cent next year, a more modest rise than the 7.4 per cent predicted by the Office for Budget Responsibility. Other estimates are below Archer's five per cent mark, with Halifax predicting three to five per cent growth and the Royal Institute of Chartered Surveyors (Rics) predicting a three per cent increase.
The survey also revealed the three issues seen as most likely to affect the market next year are an interest rate hike, stamp duty, and the general election. Mark Hayward, managing director of the NAEA, said:
With agents predicting the housing shortage crisis to potentially worsen in 2015, the General Election will be a pivotal event for the housing market next year, with all three main parties pledging to build more homes should they be elected.We have already seen the current government put policies in place in an attempt to tackle the problem, with the announcement of new garden city developments, as well as the reforms to stamp duty – another change our members believe will influence the market next year.While we do see these changes as a step in the right direction and believe that stamp duty reform will allow for greater supply in the market by encouraging more people to buy and sell, these changes are still not enough.The lack of capacity within the current market means the gap between supply and demand probably won’t close for some time – we currently don’t have the resources to respond to the problem, and this is another issue that needs addressing.