Activity in the UK house building sector has continued to pick up over the last year, but the supply of new homes is still falling well short of demand, a new analysis report shows.
Boosting supply where new housing is most keenly needed, is a key priority if the UK housing market is to avoid long term distortion, according to the latest annual house builder survey from real estate firm Knight Frank.
House builders say policymakers shout boost resources for local authority planning departments, increase skills and training for the construction sector and step up the delivery of public sector land to help increase the supply of new homes, the report explains.
The survey, which shows the views of more than 160 respondents from house builders and developers across the country, also shows that two thirds of those in the industry believe that the maximum number of new homes which can be sustainably delivered across the country every year is 180,000 or less. Only 9% said that an annual supply of more than 200,000 homes was possible.
Nearly 60% of respondents expect housing completions to rise over the next year, with 18% saying the rise could be between 10% and 25%. However around half of respondents expect no change in the delivery of affordable homes over the next 12 months.
More than 90% of respondents are expecting construction costs to rise again over the next 12 months and two thirds expect that development land prices will rise again this year. Indeed, rising labour and build costs are expected to pose the greatest risk to the sector in the coming year.
The biggest policy change that would help boost development volumes would be recruiting more people to local authority planning departments, according to respondents.
The imbalance between the demand for new homes and the number of units being built is well-recognised, by the industry and political parties alike, the report points out. In the 12 months to April 2014, some 141,000 homes were built in the UK, up by 4% on the previous year. However, official household growth projections suggest an additional 230,000 potential households a year in the UK.
‘Below these headline figures, there is a recognition that the right type of homes must be built in areas where there is the most housing need, typically adjacent to existing urban areas. This has led to tensions about the greenbelt, with a lack of consensus on how to expand accommodation in some of the UK’s most thriving towns and cities,’ said Grainne Gilmore, head of residential research at Knight Frank.
‘Nearly one half of the respondents to the house builder survey said that rules around developing on greenbelt land should be loosened,’ she added.
The report explains that policymakers from all parties are keen to encourage development on brownfield land and the Royal Institution of Chartered Surveyors has recently published research suggesting there is enough brownfield land available in England to build 226,000 homes by 2019.
‘However, brownfield development is more costly than that on greenfield, and there must be some recognition of this. In addition, there must also be some recognition that brownfield sites are not always ideally situated to provide the right type of units where they are needed,’ Gilmore said.
In terms of housing delivery, nearly 60% of respondents expect to increase their housing completions in the next 12 months, with a fifth expecting to increase by up to 10% compared to the previous 12 months.
The report points out that the deadline for the changes to the use of Section 106 payments to fund infrastructure passed on 06 April but fewer than a third of local councils have so far adopted a new Community Infrastructure Levy (CIL) charging structure instead, meaning that development may be stalled as these charging structures are organised.
CIL was identified by three quarters of respondents as a potential risk to the sector in the coming years, with 56% of respondents saying it was acting as a drag on development overall. Some 44% said that policymakers should consider scrapping or reforming CIL to help boost development.
In terms of planning, the verdict on the National Planning Policy Framework (NPPF) three years on from its introduction is mixed, but overall house builders say it has contributed to a rise in development volumes.
While there may be some issues with the NPPF, only 26% said that moving back to a more regional approach to planning was a key priority for policymakers. ‘While many in the industry believe there are issues that need to be ironed out with the NPPF, there is little appetite for policymakers to launch a new form of planning legislation,’ Gilmore explained.
‘However, it is notable that only a quarter of respondents said that under the NPPF the speed of securing planning permissions had fallen. This may underpin the feeling that more resources should be allocation to local planning departments survey respondents were clear in what they wanted to see from policymakers,’ she said.
Providing additional resources to local authority planning departments was identified as the key measure for boosting development volumes by respondents. ‘Many planning departments have been affected by public sector cuts, and as a result are now overstretched. While it may on the surface seem counter intuitive, house builders and developers are in favour of robust local planning departments, it follows that developers not only want speedier decision times, but also more robust discussions around planning decisions, resulting in fewer appeals, and planning permissions granted subject to long lists of conditions,’ Gilmore said.
Improving and encouraging more skills training for the construction industry is seen as the second most important measure. The need for more skilled labour is underlined further in the survey, with 94% of respondents saying that the current cost and availability of labour was a risk to the industry. Some 40% of respondents said the risk was significant, while 42% said the risk was moderate. A further 12% said the risk was modest.
Those working in the industry also report that lack of available labour is hampering activity. The effective release of public sector land continues to be a key concern of the industry. Last year, the government announced that from this year, the HCA would become the default disposer of centrally held government land. In last year’s Autumn Statement, it was pledged that land with the capacity for up to 150,000 homes would be released between 2015 and 2020.
‘There is a need for local councils to also get involved in disposing of land or using it as part of joint venture developments. In London, the pressing need to deliver more homes has been addressed by setting up a London Land Commission to help speed up the process. It is estimated that 100,000 homes could be built in the capital if all surplus land held by the GLA alone was used for development,’ Gilmore added.
‘The need for more homes built where they are needed most is pressing. Ultimately it is a step change in supply which will help ameliorate affordability issues faced by some buyers, creating a sustainable long term housing market,’ she concluded.
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Source: Property News Spain