English: Bricks in a wall. (Photo credit: Wikipedia)
In the 1950s, the UK built more than 300,000 new houses a year, many in the public sector. The government now estimates that it needs at least 250,000 new houses each year to keep up with demand. However, the latest figures show that the number of new homes built in recent years has been consistently below 150,000 per year.
This mismatch between the supply of and demand for houses has caused some serious problems in the UK.
- Compared with demand, the National Housing Federation estimates there is now a shortfall of more than half a million dwellings.
- Many people are stuck renting when they would rather be living in a home of their own. This could lead to UK city centres becoming more expensive and less vibrant places to live.
- The housing charity Shelter claims this is forcing a quarter of those aged under 35 to stay with their parents. You may know someone in this situation!
- Getting a house in London is even more difficult. Development hasn’t started on the planned 866 apartments around the site of Battersea Power Station but nearly all have been sold.
Economic theory would suggest that supply will increase to meet demand but that hasn’t happened recently in the UK housing market. Why?
The financial crash of 2007 meant banks restricted mortgages to house buyers. The builders therefore cut back on building new houses. In turn, this forced around 250,000 people out of the construction industry. Now that demand has returned, there is a shortage of trained bricklayers and joiners.
The chairman of the Local Government Association, Gary Porter, agrees. ‘We've trained too many hairdressers and not enough bricklayers.’
The mismatch of supply and demand caused house prices to increase 6.4% last year, but house prices are not guaranteed to rise indefinitely. The fall in oil prices may provide downward pressure on future house prices.
My grandmother advised me to buy a home where I could be happy, not as an investment. Wise words!