One thing we’ve noticed is that when the subject of house prices are raised, there are frequent references to the ‘fundamental factors’ that underpin the UK housing market. Whilst it is accepted knowledge that we haven’t been building enough homes for a number of years, you rarely seem to actually see any facts and figures backing this up.

 

To address this, we’ve done a short piece of research to illustrate why over any reasonable period of time, housing remain a very strong investment opportunity.

 

 

Population increase

 

•         The UK population continues to grow (Office of National Statistics (ONS))

 

–         1971 – 55.9M

–         2007 – 61.0M

–         2021 – 67.1M

 

 

Household size continues to decrease (ONS)

 

–         1971 – 2.9 per household

–         2001 – 2.4 per household

–         2026 – 2.1 per household

 

 

Housing starts

 

-       1970 -  362,000 (ONS)

–         2007 -  160,000 (House Builders Federation and ONS)

–         2010 -  130,000 (Savills estimate)

 

 

The above numbers contrast with the governments stated aim to build 200,000 new homes per year rising to 240,000 by 2016 (2007 Comprehensive spending review). Indeed if you look at the latest available reports, housing starts in the year on year quarter to June 2008 were 19% down, with private house building starts down 27%. (click here for more details). The starts figure can also be a little mis-leading as we have seen many builders in recent months moth-balling sites part way through completion. Given what has happened to house prices since we expect this figure to continue to deteriorate   

 

With social housing starts now increasingly dependent on private developers including an element of social housing in a new development, the dramatic fall in private housing starts look likely to spill over to the social sector. Without widespread government intervention in the social sector (which looks increasingly likely) house building in the UK is likely to come to a virtual halt given that many of the housing associations into with most the ex -local authority housing now resides are highly indebted.

 

 

The outcome of the housing/population imbalance

 

Basic economics will tell you a demand/supply imbalance will lead to price rises. Whilst it is perhaps difficult to look beyond the current falling house prices, viewed over a period of a few years housing will again recover and rise substantially. Faced with a sustained shortage, the level of income people are prepared to commit to housing will also again rise.

 

 

Savills research have produced some very interesting work looking not only at likely declines but also likely recovery times back to 2007 values and beyond to 2020 – click here to view   

 

 

Whilst we still have a little way to go before we reach stability, the medium and long term outlook remains very positive